Given the Following Information from an Amortization Table for December

question 166

Multiple Choice

Given the following information from an amortization table for December 31, 2017, prepare the journal entry to record the accrual of interest at year end if the fiscal year of the company ends on September 30. Assume the last interest payment occurred on 6/30/2017, and the next interest payment on 12/31/2017. Round numbers to two decimal places. $$\begin{array} { | c | c | c | c | } \hline \begin{array} { c } 6 \% \text { Cash } \\\text { Interest }\end{array} & \begin{array} { c } 5 \% \text { Effective } \\\text { Interest }\end{array} & \begin{array} { c } \text { Premium } \\\text { Amortization }\end{array} & \begin{array} { c } \text { Carrying } \\\text { Value }\end{array} \\\hline \$ 42,000 & \$ 35,333 & \$ 6,667 & \$ 700,000 \\\hline\end{array}$$

• A) Journal Entry \[\begin{array} { | l | l | r | l | }
• \hline & \text { Account } & \text { Debit } & \text { Credit } \\
• \hline \text { September 30 } & \text { Interest Expense } & 17,666.50 & \\
• \hline & \text { Premium on Bonds Payable } & 3,333.50 & \\
• \hline & \text { Interest Payable } & & 21,000.00 \\
• \hline
• \end{array}\]
• B) Journal Entry \[\begin{array} { | l | l | r | c | }
• \hline & \text { Account } & \text { Debit } & \text { Credit } \\
• \hline \text { September 30 } & \text { Interest Expense } & 17,666.50 & \\
• \hline & \text { Discount on Bonds Payable } & 3,333.50 & \\
• \hline & \text { Bonds Payable } & & 21,000.00 \\
• \hline
• \end{array}\]
• C) Journal Entry \[\begin{array} { | l | l | r | c | }
• \hline & \text { Account } & \text { Debit } & \text { Credit } \\
• \hline \text { September 30 } & \text { Interest Expense } & 17,666.50 & \\
• \hline & \text { Premium on Bonds Payable } & 3,333.50 & \\
• \hline & \text { Cash } & & 21,000.00 \\
• \hline
• \end{array}\]
• D) Journal Entry \[\begin{array} { | l | l | r | c | }
• \hline & \text { Account } & { \text { Debit } } & \text { Credit } \\
• \hline \text { September 30 } & \text { Interest Expense } & 17,666.50 & \\
• \hline & \text { Discount on Bonds Payable } & 3,333.50 & \\
• \hline & \text { Cash } & & 21,000.00 \\
• \hline
• \end{array}\]

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Definitions:

Demand Curve

A graph representing the relationship between the price of a good and the quantity demanded by consumers.

Barriers To Entry

Are obstacles that make it difficult for new competitors to enter a market, including high startup costs, strict regulations, and established brand loyalty among consumers.

Excess Capacity

Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost.

Product Differentiation

A marketing strategy that businesses use to distinguish their products or services from those of competitors.