On January 1, 2013, Diab Services issued $140,000 of 4 year bonds with a stated rate of
Question:
On January 1, 2013, Diab Services issued $140,000 of 4 year bonds with a stated rate of 9%. The market rate at time of issue was 8%, so the bonds were issued with a premium and sold for $144,758. Diab uses the effective interest method to amortize bond premium. 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?
A. Cash 6,300
Premium on bonds payable 700
Interest expense 5,600
B. Interest expense 5,790
Premium on bonds payable 510
Cash 6,300
C. Interest expense 5,600
Discount on bond payable 700
Cash 6,300
D. Interest expense 5,600
Cash 5,600
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng