On January 1,2010,Jacob Issues $800,000 of 9%,13-Year Bonds at a Price

question 120

Multiple Choice

On January 1,2010,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2016,Jacob retires 20% of these bonds by buying them on the open market at 105½.All interest is accounted for and paid through December 31,2015,the day before the purchase.The straight-line method is used to amortize any bond discount. What is the journal entry to record the first interest payment on June 30,2010?

• A)
• \(\begin{array}{|c|c|c|}
• \hline \text { Interest Expense } & 36,000 & \\
• \hline \text { Cash } & & 36,000 \\
• \hline
• \end{array}\)
• B)
• \(\begin{array}{|c|r|r|}
• \hline \text { Cash } & 36,000 & \\
• \hline \text { Interest Expense } & & 36,000 \\
• \hline
• \end{array}\)
• C)
• \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 36,000 & \\
• \hline \text { Discount on Bonds Payable } & 1,077 & \\
• \hline \text { Cash } & & 37,077 \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 36,000 & \\
• \hline \text { Premium on Bonds Payable } & 1,077 & \\
• \hline \text { Cash } & & 37,077 \\
• \hline
• \end{array}\]
• E)
• \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 37,077 & \\
• \hline \text { Discount on Bonds Payable } & & 1,077 \\
• \hline \text { Cash } & & 36,000 \\
• \hline
• \end{array}\]

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