Question

On January​ 1, 2019, First Street Sales issued

$ 32 comma 000$32,000

in bonds for

$ 21 comma 700$21,700.

These are

sixminus−year

bonds with a stated interest rate of

99​%

that pay semiannual interest. First Street Sales uses the

straightminus−line

method to amortize the Bond Discount. Immediately after the issue of the​ bonds, the ledger balances appeared as​ follows:

   Bonds Payable

	32 comma 00032,000

Discount on Bonds Payable

10 comma 30010,300

After the first interest payment on June​ 30, 2019, what is the balance of Discount on Bonds​ Payable? (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

A.

debit of $ 9 comma 442$9,442

B.

debit of $ 10 comma 300$10,300

C.

debit of $ 11 comma 158$11,158

D.

credit of $ 858

Answer 1

Answer:

Correct option is a. $9 Comma 442 . $9442

Explanation:

At the time of sale of Bond , Discount on Bond payable is Debited by $10300

Life of Bonds = 6 years

Semiannual Amortization period = 6 Years x 2 = 12

Amortization of Discount on Bond Payable = Discount on Bond payable / Semiannual Amortization period

= $10300 / 12 = $858

As on June 30 , Discount on Bond payable is Credited by $858 at the time of payment of interest.

Net balance in Discount on Bond Payable Account after June 30,2019 = $10300 - $858 = $9442 Debit