On January 1, 2020, Hilda Corporation issued $600,000, 7%, 5-year bond at 102. Interest is payable each

June 30 and December 31. The company uses the effective interest method to amortize any discount or

premium. The effective interest rate in the market is 6%.

1- The journal entry to record the issuance of the bond by Hilda Corporation on January 1, 2020 is:

A) Debit Credit

Cash	600,000
Bond Payable		600,000

B)

Cash	612,000
Bond Payable		612,000

C)

Cash	612,000
Bond Payable		600,000
Discount on Bonds Payable		12,000

D)

Cash	612,000
Bond Payable		600,000
Premium on Bonds Payable		12,000

E) None of the above

2- The journal entry to record the first interest expense and interest payment on June 30,

2020 is:

A) Debit Credit

Bond Interest Expense	42,000
Cash		42,000

B)

Bond Interest Expense	21,000
Cash		21,000

C)

Bond Interest Expense	18,360
Premium on Bonds Payable	2,640
Cash		21,000

D)

Bond Interest Expense	15,300
Premium on Bonds Payable	2,200
Cash		17,500

E) None of the above

3 .assume Behzad Corporation buys, in the secondary market, $100,000 of bonds of

Hildas Corporation at 102, on Feb. 5^th, 2020. The company further classify this investment as held-to maturity.

The journal entry by Hilda Corporation to record this bond purchase by

Behzad Corporation on Feb.5^th, 2020 is:

A) Debit Credit

Investment in Bond	100,000
Interest expense	2,000
Cash		102,000

B)

Bond receivable	100,000
Cash		100,000

C)

Investment in Bond	100,000
Cash		100,000

D)

Investment in Bond	100,000
Premium on Investment in Bond	2,000
Cash		102,000

E) None of the above.