[The Following Information Applies to the Questions Displayed Below

question 172

Multiple Choice

[The following information applies to the questions displayed below.]
Austin Corporation issues $6,000,000 of 10%,10-year bonds,dated December 31,Year 1.The bonds are issued on April 30,Year 2,at 100 plus accrued interest.Interest on the bonds is payable semiannually each June 30 and December 31.
-The entry to record the issuance of bonds payable on April 30,Year 2,includes:

• A)A credit to Premium on Bonds Payable of $200,000.
• B)A debit to Cash of $150,000.
• C)A debit to Bond Interest Expense of $200,000.
• D)A credit to Bond Interest Payable of $200,000.

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Definitions:

Insurance Policy

A contract between an insurer and a policyholder that specifies the terms and conditions under which the insurer will compensate the policyholder for loss.

Adjusting Entries

At the close of an accounting period, journal entries are made to apportion income and spending to the timeframe in which they legitimately took place.

Prepaid Insurance

Payments made in advance for insurance coverage, recorded as an asset on the balance sheet until the coverage period elapses.

Adjusting Entries

Entries in accounting made at the period's end to assign earnings and costs to their respective actual periods.