Webster Company Issues $1,000,000 Face Value, 6%, 5-Year Bonds Payable

question 123

Multiple Choice

Webster Company issues $1,000,000 face value, 6%, 5-year bonds payable on 31 December 2013. Interest is paid semiannually each 30 June and 31 December. The bonds sell at a price of 97; Webster uses the straight-line method of amortizing bond discount or premium.
-The amount of bond interest expense recognized by Webster Company in 2013 with respect to these bonds is:

• A) $60,000.
• B) $63,000.
• C) $120,000.
• D) $66,000.

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Definitions:

Direct Labor-Hours

The total hours of labor time directly involved in producing goods or providing services, often used as a basis for allocating manufacturing overhead.

Fixed Manufacturing Overhead

Costs related to production that do not change with the level of output, such as rent, salaries of permanent staff, and depreciation of factory equipment.

Job-Order Costing System

An accounting system that assigns costs to specific production batches or jobs, used in environments where products are customized or not identical.

Manufacturing Departments

Divisions within a manufacturing organization, each focusing on a specific aspect of the production process.