Question
On January 1 of Year 1, Lily Company issued a $100,000, 14%, 10-year bond. Interest is paid semi-annually each June 30 and December 31, so
On January 1 of Year 1, Lily Company issued a $100,000, 14%, 10-year bond. Interest is paid semi-annually each June 30 and December 31, so the first coupon payment was made on June 30 of Year 1 and the second coupon payment was made on December 31 of Year 1. On the day the bond was issued, the annual market interest rate on bonds with the same degree of riskiness was 8%. Lily uses the effective-interest method on its books. Note: Round all calculations to the nearest dollar. The entry to record the FIRST coupon payment on June 30 of Year 1 would include a
A. DEBIT to Premium on Bonds of $1,369 | ||
B. DEBIT to Premium on Bonds of $5,631 | ||
C. CREDIT to Premium on Bonds of $1,369 | ||
D. CREDIT to Premium on Bonds of $5,631 | ||
E. DEBIT to Premium on Bonds of $1,424 | ||
F. DEBIT to Premium on Bonds of $5,576 | ||
G. CREDIT to Premium on Bonds of $5,576 | ||
H. CREDIT to Premium on Bonds of $1,424 |
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