On January 1, 2019, Agree Company issued $85,000 of five-year, 8% bonds when the market interest...
On January 1, 2019, Agree Company issued $85,000 of five-year, 8% bonds when the market interest rate was 12%. The issue price of the bonds was $62,401. Agree uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar.)
A. Interest Expense 3,400 Discount on Bonds Payable 1,700 Cash 5,100
B. Interest Expense 5,100 Cash 5,100
C. Interest Expense 3,744 Discount on Bonds Payable 344 Cash 3,400
D. Interest Expense 5,100 Discount on Bonds Payable 3,400 Cash 1,700
Homework Answers
Answer :
C) Interest Expenses $ 3,744 Discount on Bonds Payable 344 Cash 3,400
| Debit | Credit | |
| Interest Expenses (62401*12%*6/12) | 3,744 | |
| Discount on Bonds Payable | 344 | |
| Cash ( 85000*8%*6/12) | 3,400 |
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