Question

Bee Company issued 5-year, 7% bonds with a par value of $95,000. The company received $92,947 for the bonds. Using the straight-line method to amortize the discount, the amount of interest expense for the first semiannual interest period is: $6,650.00. $7,060.60. $3,530.30. $3,119.70. $3,325.00.

On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $208,531. The journal entry to record the issuance of the bond is:

Debit Cash $208,531; credit Discount on Bonds Payable $8,531; credit Bonds Payable $200,000.

Debit Bonds Payable $200,000; debit Bond Interest Expense $8,531; credit Cash $208,531.

Debit Cash $208,531; credit Bonds Payable $208,531.

Debit Cash $200,000; debit Premium on Bonds Payable $8,531; credit Bonds Payable $208,531.

Debit Cash $208,531; credit Premium on Bonds Payable $8,531; credit Bonds Payable $200,000.

On January 1, a company issues bonds dated January 1 with a par value of $270,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $280,420. The journal entry to record the first interest payment using straight-line amortization is:

Debit Bond Interest Expense $15,892.00; credit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.

Debit Interest Payable $14,850.00; credit Cash $14,850.00.

Debit Bond Interest Expense $15,892.00; credit Discount on Bonds Payable $1,042.00; credit Cash $14,850.00.

Debit Bond Interest Expense $13,808.00; debit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.

Debit Bond Interest Expense $13,808.00; debit Discount on Bonds Payable $1,042.00; credit Cash $14,850.00.

Answer 1

A) $3,530.3

B)

Debit Cash $200,000; debit Premium on Bonds Payable $8,531; credit Bonds Payable $208,531.

C)

Debit Bond Interest Expense $13,808.00; debit Premium on Bonds Payable $1,042.00; credit Cash $14,850.00.

Step-by-step explanation:

discount:

95,000 - 92,947 = 2,053

This amount is distribute equally among all interest paymeny:

2,053 / 10 payment = 205.3

cash outlay + amortization on discount = interest expense

95,000 x 7% x 1/2 + 205.3 = $3,530.3

B)

debit the cash received

we credit the bond payable for their face value

we adjust using premium when lower and premium when higher

C)

we calcualte the premium and divide oer total payment to get the amortization:

280,420 - 270,000 = 10,420 / 10 = 1,042

cash outlay - amortization on premium = interest expense

270,000 x 11% x 1/2 - 1,042 = 13,808