Question

On January 1, a company issued and sold a $407,000, 8%, 10-year bond payable, and received proceeds of $402,000. 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: Multiple Choice Debit Bond Interest Expense $16,280; debit Discount on Bonds Payable $250; credit Cash $16,530. Debit Bond Interest Expense $16,030; debit Discount on Bonds Payable $250; credit Cash $16,280. Debit Bond Interest Expense $32,560; credit Cash $32,560. Debit Bond Interest Expense $16,280; credit Cash $16,280. Debit Bond Interest Expense $16,530; credit Cash $16,280; credit Discount on Bonds Payable $250.

Answer 1

interest expense 16,530 debit

cash 16,280 credit

discount on BP 250 credit

--to record payment of the first interst --

Step-by-step explanation:

proceeds_ 402,000

face value (407,000)

discount 5,000

cash outlay to bondholdrs_

principal x rate x time

407,000 x 8% x 1/2 (half-year) = $ 16,280

amortization under straight line:

discount / total payments

5,000 / 20 (10 years x 2 payment per year) = 250

Total interest expense: 16,280 interest + 250 amortization = 16,530