On January 1, 2015, Carter Sales Issued $15,000 in Bonds

question 116

Multiple Choice

On January 1, 2015, Carter Sales issued $15,000 in bonds for $15,800. They were 8-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the Bond Premium. Immediately after issue of the bonds, the ledger balances appeared as follows: After the first interest payment on June 30, 2015, what will be the balance in the Premium Account?

• A)debit of $50
• B)debit of $900
• C)credit of $625
• D)credit of $750

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Definitions:

Simple Rate Of Return

A financial metric that calculates the increase in profits or savings expected from an investment as a percentage of the initial investment cost.

Annual Cost Savings

The reduction in costs achieved during a fiscal year, enhancing the organization's profitability.

Discount Rate

This rate is applied within discounted cash flow analysis to determine the contemporary monetary worth of future cash movements.

Investment Required

The total amount of capital needed to undertake a project, investment, or start a business.