The Amazing Widget Company Issues $515,000 of 12%,10-Year Debentures at 105

question 83

Multiple Choice

The Amazing Widget Company issues $515,000 of 12%,10-year debentures at 105 on 30 April 2017.The debentures pay interest on 30 April and 31 October.Assume that the company uses the straight-line method for amortisation.What is the journal entry to record the first interest payment on 31 October 2017? (Round to the nearest dollar. )

• A)credit to Premium on bonds payable for $1288.
• B)debit to Interest expense for $32,188.
• C)debit to Interest expense for $29,612.
• D)debit to Cash for $30,900.

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Definitions:

Government Securities

Financial instruments issued by a government to borrow money from investors, often with a promise to pay periodic interest and repay the principal at maturity.

Fed Regulations

Fed regulations are rules set by the Federal Reserve, the central bank of the United States, to govern the practices of financial institutions, aiming at ensuring stability and transparency in the financial system.

Cash Shortages

A situation where there is not enough cash available to meet demands.

Bank Vaults

Highly secured rooms or compartments in banks used for storing valuable items, including money, documents, and safe deposit boxes.