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

question 100

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 first interest payment using straight-line amortization is:

• A)Debit Interest Payable $13,500;credit Cash $13,500.00.
• B)Debit Bond Interest Expense $12,282.30;debit Discount on Bonds Payable $1,217.70;credit Cash $13,500.00.
• C)Debit Bond Interest Expense $14,717.70;credit Premium on Bonds Payable $1,217.70;credit Cash $13,500.00.
• D)Debit Bond Interest Expense $14,717.70;credit Discount on Bonds Payable $1,217.70;credit Cash $13,500.00.
• E)Debit Bond Interest Expense $12,282.30;debit Premium on Bonds Payable $1,217.70;credit Cash $13,500.00.

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Definitions:

Break-even Point

The level of sales at which total revenues equal total expenses, resulting in no net profit or loss.

Variable Cost

Expenses that change in proportion with the level of activity or production volume, such as materials costs or sales commissions.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business over a certain period, such as rent, salaries, and loan payments.

High-low Method

A technique in managerial accounting used to estimate variable and fixed costs by analyzing the highest and lowest levels of activity.