On January 1,a Company Issues Bonds Dated January 1 with a Par

question 100

Multiple Choice

On January 1,a company issues bonds dated January 1 with a par value of $300,000.The bonds mature in 5 years.The contract rate is 9%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $312,177.The journal entry to record the first interest payment using straight-line amortization is:

• A)Debit Interest Payable $13,500;credit Cash $13,500.00.
• B)Debit Bond Interest Expense $12,282.30;debit Discount on Bonds Payable $1,217.70;credit Cash $13,500.00.
• C)Debit Bond Interest Expense $14,717.70;credit Premium on Bonds Payable $1,217.70;credit Cash $13,500.00.
• D)Debit Bond Interest Expense $14,717.70;credit Discount on Bonds Payable $1,217.70;credit Cash $13,500.00.
• E)Debit Bond Interest Expense $12,282.30;debit Premium on Bonds Payable $1,217.70;credit Cash $13,500.00.

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Definitions:

Factory Equipment

Durable goods or machinery used in manufacturing processes, typically involving production or maintenance tasks.

Indirect Method

A type of cash flow reporting in financial statements where net income is adjusted for changes in balance sheet accounts to calculate the cash flow from operating activities.

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowings of an entity, such as issuing stock or obtaining loans.

Mortgage Notes Payable

A form of long-term debt where the borrower agrees to pay back a loan used to purchase real estate, along with interest, over a specified period.