Accounting 2 homework help?

Posted on 2014-04-11 11:51:00 in Accounting by JONATHAN

On January 1 of Year 1, Drum Line Airways issued $3,100,000 of par value bonds for $2,830,000. The bonds pay interest semiannually on January 1 and July 1. The contract rate of interest is 7% while the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $9,000 every six months.

The amount of interest expense recognized by Drum Line Airways on the bond issue in Year 1 would be:

$235,000.

$199,000.

$217,000.

$248,000.

$117,500.



On January 1, a company issued and sold a $410,000, 5%, 10-year bond payable, and received proceeds of $405,000. 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:

Debit Bond Interest Expense $10,500; credit Cash $10,250; credit Discount on Bonds Payable $250.

Debit Bond Interest Expense $10,250; credit Cash $10,250.

Debit Bond Interest Expense $20,500; credit Cash $20,500.

Debit Bond Interest Expense $10,000; debit Discount on Bonds Payable $250; credit Cash $10,250.

Debit Bond Interest Expense $10,250; debit Discount on Bonds Payable $250; credit Cash $10,500.



A company issued 5-year, 8% bonds with a par value of $106,000. The company received $103,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:

$4,445.30.

$8,480.00.

$8,890.60.

$4,034.70.

$4,240.

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