Question

On January 1, a company issues bonds dated January 1, 2018 with a par value of...

On January 1, a company issues bonds dated January 1, 2018 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid annually on December 31. The bonds are sold for $312,200. The journal entry to record the first interest payment using straight-line amortization is:

Muheet Corporation issues $550,000, 10%, 5-year bonds on January 1, 2019 for $489,000. Interest is paid annually on January 1. If Muheet Corporation uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2019 would be:
Select one:
a. $55,000.
b. $42,800.
c. $61,000.
d. $67,200.

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Abdul-Rahim Taysir

Homework Answers

Answer #1
1]
31-Dec Interest expense $            24,560
Premium on bonds payable [12200/5] $              2,440
Cash [300000*9%] $          27,000
[To record payment of first interest]
2] MUTHEET CORPORATION:
Coupon payment = 550000*10% = $            55,000
Add: Discount amortized = (550000-489000)/5 = $            12,200
Interest expense $            67,200
Answer: [d] $67,200
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