Question
On January 1, 2011, Air New Jersey Inc. issued $5000 in principal of 3-year bonds with a 3% stated interest rate and semi-annual payments (non-amortizing
On January 1, 2011, Air New Jersey Inc. issued $5000 in principal of 3-year bonds with a 3% stated interest rate and semi-annual payments (non-amortizing debt). The bond was sold at a $533 discount to par, which implied a 7% market interest rate. The following information is from the bond's amortization table:
Payment | Beginning carrying value | Effective interest | Discount amortization | Ending carrying value |
1/1/2011 | $4,467 | |||
6/30/2011 | $4,467 | $156 | $81 | $4,548 |
12/31/2011 | $4,548 | $159 | $84 | $4,633 |
6/30/2012 |
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Which three of the following lines comprised the journal entry for the first interest payment?
On January 1, 2011, Air New Jersey Inc. issued $5000 in principal of 3-year bonds with a 3% stated interest rate and semi-annual payments (non-amortizing debt). The bond was sold at a $533 discount to par, which implied a 7% market interest rate. The following information is from the bond's amortization table:
Payment | Beginning carrying value | Effective interest | Discount amortization | Ending carrying value |
1/1/2011 | $4,467 | |||
6/30/2011 | $4,467 | $156 | $81 | $4,548 |
12/31/2011 | $4,548 | $159 | $84 | $4,633 |
6/30/2012 |
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Which three of the following lines comprised the journal entry for the first interest payment?
Dr. Debt Payable $81
Dr. Interest Expense $175
Cr. Cash $156
Cr. Cash $75
Dr. Discount on Debt Payable $81
Cr. Discount on Debt Payable $81
Cr. Cash $175
Dr. Interest Expense $156
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