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

question 135

Multiple Choice

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.The journal entry to record the first interest payment using straight-line amortization is:

• A)Debit Interest Payable $14,000.00;credit Cash $14,000.00.
• B)Debit Interest Expense $14,000.00;credit Cash $14,000.00.
• C)Debit Interest Expense $15,620.70;credit Discount on Bonds Payable $1,620.70;credit Cash $14,000.00.
• D)Debit Interest Expense $12,379.30;debit Discount on Bonds Payable $1,620.70;credit Cash $14,000.00.
• E)Debit Interest Expense $15,620.70;credit Premium on Bonds Payable $1,620.70;credit Cash $14,000.00.

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Definitions:

John Maynard Keynes

A British economist whose theories on government intervention in economies (Keynesian economics) have greatly influenced modern macroeconomic policies, particularly regarding the use of fiscal and monetary measures.

Karl Marx

A 19th-century philosopher, economist, and political theorist known for his critique of capitalism and the development of Marxist theory.

Milton Friedman

An influential American economist and Nobel laureate known for his strong belief in free-market capitalism and minimal government intervention.

Thorstein Veblen

An American economist and sociologist known for his theory of the leisure class and conspicuous consumption.