On January 1, a Company Issues Bonds Dated January 1

question 124

Multiple Choice

On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using the effective interest method of amortization is:

• A)Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.
• B)Debit Interest Payable $14,000.00; credit Cash $14,000.00.
• C)Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.
• D)Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.
• E)Debit Interest Expense $15,351.72; credit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.Cash payment of interest = $400,000 * .07 * ½ = $14,000

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Definitions:

Theory X Management

A management style based on the assumption that employees are inherently lazy and unambitious, requiring strict oversight and control.

Adversarial HR Management

A strategy in human resource management that views the relationship between employers and employees as inherently conflictual, emphasizing competition and conflict over cooperation.

Union Substitution

A strategy employed by employers to avoid unionization among their employees, often by providing benefits similar to those a union would negotiate.

Management Policies

Guidelines and principles adopted by an organization's leadership to govern decisions and actions within the company.