Question
1) Crane Company issued $540000 of 7%, 10-year bonds on one of its interest dates for $466398 to yield an effective annual rate of 9%.
1) Crane Company issued $540000 of 7%, 10-year bonds on one of its interest dates for $466398 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. Interest is paid annually.
The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a
a) debit to Interest Expense for $48600.
b) debit to Interest Expense for $37800.
c) credit to Cash for $41976.
d) credit to Discount on Bonds Payable for $4176.
2) Sunland Company issued $470000 of 7%, 10-year bonds on one of its interest dates for $405939 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used.
How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year?
a) $32900
b) $36535
c) $42300
d) $28416
3) A corporation issued $610000, 10%, 5-year bonds on January 1, 2020 for $658800, which reflects an effective-interest rate of 7%. Interest is paid annually on January 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on December 31, 2020, is
a) $65880.
b) $46116.
c) $61000.
d) $42700.
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