On the First Day of the Fiscal Year, Lisbon Co

question 178

Multiple Choice

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight-line method) for the year by Lisbon Co. includes a debit to​

• A) Interest Expense for $2,500
• B) Premium on Bonds Payable for $2,500
• C) Interest Expense for $5,000
• D) Premium on Bonds Payable for $5,000

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision-making processes, often leading to quick but sometimes inaccurate conclusions.

Propositions

Statements or assertions that express a judgment or opinion.

Predicate

The part of a sentence or clause containing a verb that states something about the subject.

Spreading Activation Model

A cognitive theory suggesting ideas in the brain are connected in a network, and thinking about one concept can trigger related concepts.