1.On January 1, a company issued and sold a $408,000, 9%, 10-year bond payable,
ID: 2430610 • Letter: 1
Question
1.On January 1, a company issued and sold a $408,000, 9%, 10-year bond payable, and received proceeds of $403,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
a. Debit Bond Interest Expense $36,720; Credit cash $36,720
b. Debit Bond Interest Expense $18,360; Credit Cash $18,360
c. Debit Bond INterest Expense $18,360; debit dicsount on bonds payable $250; credit cash $18,610
d. debit bond interest expense $18,110; debit discount on bonds payable $250; credit cash $18,360
e. Debit bond interest expense $18,610; credit cash $18,360; credit discount on bonds payable $250
2.On January 1, a company issues bonds dated January 1 with a par value of $730,000. The bonds mature in 3 years. The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $718,000. The journal entry to record the first interest payment using straight-line amortization is:
a. Debit interest expense $38,500; credit discount on bonds payable $2,000; credit cash $36,500
b. debit interest payable $36,500; credit cash $36,500
c. debit interest expense $36,500; credit premium on bonds payable $2,000; credit cash $34,500
d. debit interest expense $36,500; credit cash $36,500
e. debit interest expense $34,500; debit discount on bonds payable $2,000; credit cash $36,500
3.Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $133,000; Chris, $93,000; and Molly, $113,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $73,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:
a. $73,000
b. $130,180
c. $135,820
d. $82,400
e. $133,000
Explanation / Answer
Q1. Answer is e. Debit Bond interest expense $18610; credit cash $18360 and credit discount on bonds $ 250 Explanation: Total discount on bonds issued: 408000-403000= 5000 Periods: 20 periods Amortization of Semi Annual Discount (5000/20): 250 Cash interest paid: 408000*9%*6/12 = 18360 Total Interest expense: 18360+250 = 18610 Q2. Answer is a. Debit Bond interest expense $38500; credit cash $36500 and credit discount on bonds $ 2000 Explanation: Total discount on bonds issued: 730000-718000= 12000 Periods: 6 periods Amortization of Semi Annual Discount (12000/6): 2000 Cash interest paid: 730000*10%*6/12 = 36500 Total Interest expense: 36500+2000 = 38500 Q3. Answer is b. $ 130180 Explanation: Total ccapital before admission 339000 Capital of new partner 73000 Total capital after admission 412000 New partner capital should be 82400 Less: Actual Capital 73000 Bonus to new partner 9400 Share of Caitlin @30% 2820 Hence, Capital of Caitlin after admission 130180 (133000-2820)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.