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

question 118

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 the effective interest method of amortization is:

• A)Debit Bond Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00.
• B)Debit Interest Payable $13,500; credit Cash $13,500.00.
• C)Debit Bond Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00.
• D)Debit Bond Interest Expense $14,717.70; credit Premium 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:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values in a data set differ from the mean.

Defined Contribution Plan

A retirement plan where the employer, employee, or both contribute to an individual's account, and the retirement benefits depend on the account's investment performance.

Risk-free Return

The theoretical return on an investment with zero risk of financial loss, often represented by the yield on government securities.

Defined Contribution Plan

A retirement plan where both the employee and employer contribute to an account, with the final benefit dependent on account performance.