The Journal Entry a Company Records for the Payment of Interest

question 102

Multiple Choice

The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is

• A) debit Interest Expense, credit Cash and Premium on Bonds Payable
• B) debit Interest Expense, credit Cash
• C) debit Interest Expense and Premium on Bonds Payable, credit Cash
• D) debit Interest Expense, credit Interest Payable and Premium on Bonds Payable

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Definitions:

Voting Common Stock

Shares that give the holder the right to vote on corporate policy and make decisions affecting the company's governance.

Net Income

The ultimate financial benefit a company receives after revenue has been adjusted for expenses and taxes.

Bond Investment

Purchasing of bonds as a way to generate income through interest payments, with potential for capital gains.

Book Value

The value of an asset as it appears on a balance sheet, calculated by subtracting any depreciation or amortization from the asset's original cost.