Question

Apple Company issues $1,000,000 face value, 6%, 5-year bonds payable on December 31, 2018. Interest is paid semiannually each June 30 and December 31. The bonds sell at a price of 97; Greece uses the straight-line method of amortizing bond discount or premium.

1) The entry made by Apple Company to record issuance of the bonds payable at December 31, 2018, includes:

A- a credit to bonds payable of 970000

B_ a credit to bond interest 30000

C- A debit of cash of 1,000,000

D- A debit to discount on bonds payable of 30000

2) Apple's entry at June 30, 2019, to record the first semiannual payment of interest and amortization of discount on the bonds includes a:

A- debit to bond interest expense of 30000

B- Credit to cash of 33000

C- Debit to discount on bonds payable of 3000

D- Debit to bond interest expense of 33000

3) The amount of bond interest expense recognized by Apple Company in 2019 with respect to these bonds is:

A- 120000

B- 66000

C- 63000

D- 60000

4) The carrying value of this liability in Greece Company's December 31, 2019, balance sheet is:

A- 976000

B- 967000

C- 1000000

D-970000

Answer 1