The Amazing Widget Company Issues $500,000 of 6%, 10-Year Bonds

question 90

Multiple Choice

The Amazing Widget Company issues $500,000 of 6%, 10-year bonds at 103 on March 31, 2014. The bond pays interest on March 31 and September 30. Assume that the company uses the straight-line method for amortization. The journal entry to record the first interest payment on September 30, 2014 is a:

• A)debit to Cash for $15,000.
• B)debit to Interest Expense for $15,750.
• C)debit to Interest Expense for $14,250.
• D)credit to Premium on Bonds Payable for $750.

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Definitions:

World Price

The price at which goods trade on the international market, reflecting the global balance of supply and demand for those goods.

Import

Goods or services that come into a country from abroad for sale.

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a product and the actual price they do pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive, due to market prices being higher.