On January 1, a Company Issues Bonds Dated January 1

question 119

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.

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Definitions:

Performance Feedback

Information given to individuals about their actions' outcomes regarding effectiveness, aiming to improve future performance.

Visual Representation

A method of displaying data, concepts, or information using images, symbols, or diagrams.

Negative Reinforcement

A behavioral principle where the removal of an unfavorable experience or outcome increases the likelihood of a behavior being repeated.

Punishment

The infliction or imposition of a penalty as retribution for an offense, often discussed in the context of disciplining employees or behavioral correction.