A Company Issued 8%,15-Year Bonds with a Par Value of $550,000

question 21

Multiple Choice

A company issued 8%,15-year bonds with a par value of $550,000 that pay interest semi-annually.The current market rate is 8%.The journal entry to record each semiannual interest payment is:

• A)Debit Bond Interest Expense $22,000;credit Cash $22,000.
• B)Debit Bond Interest Expense $44,000;credit Cash $44,000.
• C)Debit Bond Interest Payable $22,000;credit Cash $22,000.
• D)Debit Bond Interest Expense $550,000;credit Cash $550,000.
• E)No entry is needed,since no interest is paid until the bond is duE.$550,000 * .08 * ½ year = $22,000

---

Definitions:

Cash Balance

The total amount of money in cash form available in an account at any given time.

Deposits

Money placed into a bank account or with a financial institution for safekeeping.

Bank Statement

A formal accounting by a bank of the adding and subtracting activities that have occurred in one bank account over a stated period of time (usually a month).

Check Register

A personal record book or digital log used to track checks written, deposits made, and the current balance of a checking account.