On January 1,a Company Issued and Sold a $400,000,7%,10-Year Bond

question 143

Multiple Choice

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

• A)Debit Bond Interest Expense $14,000;credit Cash $14,000.
• B)Debit Bond Interest Expense $28,000;credit Cash $28,000.
• C)Debit Bond Interest Expense $14,000;debit Discount on Bonds Payable $200;credit Cash $14,200.
• D)Debit Bond Interest Expense $13,800;debit Discount on Bonds Payable $200;credit Cash $14,000.
• E)Debit Bond Interest Expense $14,200;credit Cash $14,000;credit Discount on Bonds Payable $200.

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Definitions:

Control Premium

An additional amount paid over the current market value of a company when acquiring a controlling interest, reflecting the value of gaining control.

Valuation Models

Valuation models are analytical methods used to estimate the current value of an asset or a company based on various economic factors.

Consolidated Net Income

The total net income of a parent company and its subsidiaries after eliminating intercompany transactions and distributions among subsidiaries.

Controlling Interest

Ownership of a sufficient portion of a company's stock to influence or direct the management and operations.