On January 1,your Company Issues a 5-Year Bond with a Face

question 141

Multiple Choice

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Your company used the effective-interest method of amortization.At the end of the first year,your company should:

• A) debit Interest Expense for $543, debit Premium on Bonds Payable for $157, and credit Interest Payable for $700.
• B) debit Interest Expense for $700, credit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
• C) debit Interest Expense for $700, debit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
• D) debit Interest Expense for $543 and credit Interest Payable for $543.

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Definitions:

Class Exception

In programming, it refers to a template for creating objects designed to handle errors and other exceptional situations uniquely.

Constructors

Special methods in a class that are called when a new object instance is created, used to initialize the object.

StringIndexOutOfBoundsException

An exception in Java that is thrown to indicate that an index is either negative or greater than the size of the string.

ParseInt

A method in Java that converts a string into an integer value, throwing an exception if the string cannot be converted.