On January 1,a Company Issues Bonds Dated January 1 with a Par

question 66

Multiple Choice

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.The journal entry to record the issuance of the bond is:

• A)Debit Cash $312,177;credit Discount on Bonds Payable $12,177;credit Bonds Payable $300,000.
• B)Debit Cash $300,000;debit Premium on Bonds Payable $12,177;credit Bonds Payable $312,177.
• C)Debit Bonds Payable $300,000;debit Bond Interest Expense $12,177;credit Cash $312,177.
• D)Debit Cash $312,177;credit Premium on Bonds Payable $12,177;credit Bonds Payable $300,000.
• E)Debit Cash $312,177;credit Bonds Payable $312,177.

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Definitions:

Efficient Scale

The level of production at which a firm can produce its product at the lowest average cost per unit.

Economies of Scale

Economies of scale describe the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the cost per unit of output decreases with increasing scale.

Specialization of Labor

An economic strategy where individuals or groups focus on producing a limited range of goods or services to increase efficiency and output.