MC Qu. 109 A company issued...

A company issued 7%, 15-year bonds with a par value of $540,000 that pay interest semiannually. The market rate on the date of issuance was 7%. The journal entry to record each semiannual interest payment is:

Multiple Choice:

Debit Bond Interest Expense $18,900; credit Cash $18,900.

Debit Bond Interest Expense $37,800; credit Cash $37,800.

Debit Bond Interest Payable $36,000; credit Cash $36,000.

Debit Bond Interest Expense $490,000; credit Cash $490,000.

No entry is needed, since no interest is paid until the bond is due.

MC Qu. 110 On January 1...

On January 1, Parson Freight Company issues 8.0%, 10-year bonds with a par value of $2,200,000. The bonds pay interest semiannually. The market rate of interest is 9.0% and the bond selling price was $2,050,507. The bond issuance should be recorded as:

Multiple Choice

Debit Cash $2,200,000; credit Bonds Payable $2,200,000.

Debit Cash $2,050,507; credit Bonds Payable $2,050,507.

Debit Cash $2,200,000; credit Bonds Payable $2,050,507; credit Discount on Bonds Payable $149,493.

Debit Cash $2,050,507; debit Discount on Bonds Payable $149,493; credit Bonds Payable $2,200,000.

Debit Cash $2,050,507; debit Interest Expense $149,493; credit Bonds Payable $2,200,000.