On January 1, a Company Issues Bonds Dated January 1

question 108

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 straight-line amortization is:

• A) Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.
• B) Debit Interest Expense $14,000.00; credit Cash $14,000.00.
• C) Debit Interest Payable $14,000.00; credit Cash $14,000.00.
• D) Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.
• E) Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.

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Definitions:

Arousal

A state of physiological and psychological alertness or excitement, varying in intensity and triggered by different stimuli.

Genital Arousal

The physiological response of the genital organs to sexual stimulation, leading to an increase in blood flow and erection in males or lubrication and swelling in females.

Homosexuality

Romantic or sexual attraction to people of one's own sex.

Excitation Transfer

A psychological process where arousal from one situation intensifies the reaction to a subsequent, unrelated event.