MC Qu. 109 A company issued... A company issued 7%, 15-year bonds with a par val
ID: 2339240 • Letter: M
Question
MC Qu. 109 A company issued...
A company issued 7%, 15-year bonds with a par value of $540,000 that pay interest semiannually. The market rate on the date of issuance was 7%. The journal entry to record each semiannual interest payment is:
Multiple Choice:
Debit Bond Interest Expense $18,900; credit Cash $18,900.
Debit Bond Interest Expense $37,800; credit Cash $37,800.
Debit Bond Interest Payable $36,000; credit Cash $36,000.
Debit Bond Interest Expense $490,000; credit Cash $490,000.
No entry is needed, since no interest is paid until the bond is due.
MC Qu. 110 On January 1...
On January 1, Parson Freight Company issues 8.0%, 10-year bonds with a par value of $2,200,000. The bonds pay interest semiannually. The market rate of interest is 9.0% and the bond selling price was $2,050,507. The bond issuance should be recorded as:
Multiple Choice
Debit Cash $2,200,000; credit Bonds Payable $2,200,000.
Debit Cash $2,050,507; credit Bonds Payable $2,050,507.
Debit Cash $2,200,000; credit Bonds Payable $2,050,507; credit Discount on Bonds Payable $149,493.
Debit Cash $2,050,507; debit Discount on Bonds Payable $149,493; credit Bonds Payable $2,200,000.
Debit Cash $2,050,507; debit Interest Expense $149,493; credit Bonds Payable $2,200,000.
Explanation / Answer
109 Semiannual interest expense = (540000*7%/2) = $18900 Debit Bond Interest Expense $18,900; credit Cash $18,900. 110 Debit Cash $2,050,507; debit Discount on Bonds Payable $149,493; credit Bonds Payable $2,200,000.
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