On January 1 of the current year, Health Corporation issues $3,000,000 5-year 8%
ID: 2480841 • Letter: O
Question
On January 1 of the current year, Health Corporation issues $3,000,000 5-year 8% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a
debit to Interest Expense$120,000.
debit to Interest Expense$240,000.
credit to Discount on Bonds Payable$12,000.
credit to Discount on Bonds Payable$24,000.?
debit to Interest Expense$120,000.
debit to Interest Expense$240,000.
credit to Discount on Bonds Payable$12,000.
credit to Discount on Bonds Payable$24,000.?
Explanation / Answer
The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a credit to Discount on Bonds Payable$12,000.
As Bonds costing $3,000,000 issued at 96 which is $2,880,000
So unamortized discounts is 120,000 amortized equally in 10 semi-annual period.
Entry will be
.
Date Particulars L.F Debit ($) Credit ($) Dec-31 Bond Interest Expense $1,32,000 Discount on Bonds payable $12,000 Cash $1,20,000 (For paid semi-annual interest on 8% bonds for 6 months and amortization of discount for half year)Related Questions
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