On January 1, 2010, Jacob Issues $600,000 of 11%, 15-Year $\begin{array} { | c | r | r | } \hline \text { Interest Expense } & 33,000 & \\\hline \text { Cash } & & 33,000 \\\hline\end{array}$

question 114

Multiple Choice

On January 1, 2010, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½. Six years later, on January 1, 2016, Jacob retires 30% of these bonds by buying them on the open market at 98½. 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)\(\begin{array} { | c | r | r | }
• \hline \text { Interest Expense } & 33,000 & \\
• \hline \text { Cash } & & 33,000 \\
• \hline
• \end{array}\)
• B)\(\begin{array} { | l | r | r | }
• \hline \text { Cash } & 33,000 & \\
• \hline \text { Interest Expense } & & 33,000 \\
• \hline
• \end{array}\)
• C)\(\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 32,500 & \\
• \hline \text { Discount on Bonds Payable } & 500 & \\
• \hline \text { Cash } & & 33,000 \\
• \hline
• \end{array}\)
• D)\(\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 32,500 & \\
• \hline \text { Premium on Bonds Payable } & 500 & \\
• \hline \text { Cash } & & 33,000 \\
• \hline
• \end{array}\)
• E)\(\begin{array} { | c | r | r | }
• \hline \text { Interest Expense } & 33,000 & \\
• \hline \text { Discount on Bonds Payable } & & 500 \\
• \hline \text { Cash } & & 32,500 \\
• \hline
• \end{array}\)

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