The Entry to Record the Semiannual Payment and Amortization of the Discount

question 126

Multiple Choice

The entry to record the semiannual payment and amortization of the discount using the straight-line method on a 10%,$200,000,5-year bond issued at 97 would be to:

• A)debit Bond Interest Expense $5,000;credit Cash $5,000.
• B)debit Bond Interest Expense $5,300;credit Cash $5,000;credit Discount on Bonds Payable $300.
• C)debit Bond Interest Expense $10,600;credit Cash $10,600.
• D)debit Bond Interest Expense $10,600;credit Cash $10,000;credit Discount on Bonds Payable $600.

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Definitions:

Long-Run Cost

The expenses a firm incurs over a period where all inputs are variable, thus considering the scalability and technology change effects on production costs.

Constant-Cost Industry

An industry in which the cost of production does not change significantly with either an increase or decrease in output levels.

Constant-cost Industry

An industry in which the input prices do not change as the industry's output changes.

Competitive Market

A market structure where multiple firms offer similar or identical products or services, and no single firm can significantly influence market prices.