The Bower Company sold $100,000 of 20-year bonds for $95,000. The stated rate on the bonds...
The Bower Company sold $100,000 of 20-year bonds for $95,000. The stated rate on the bonds was 7%, and interest is paid annually on December 31. What entry would be made on December 31 when the interest is paid? (Numbers are omitted.)
a. Interest Expense (debit) Bonds Payable (credit) Cash (credit)
b. Interest Expense (debit) Discount on Bonds Payable (credit) Cash (credit)
c. Interest Expense (debit) Discount on Bonds Payable (debit) Cash (credit)
d. Interest Expense (debit) Cash (credit)
Homework Answers
| The entry would be made on December 31 when the interest is paid is: |
| Interest Expense (debit) Discount on Bonds Payable (credit) Cash (credit) |
| Option B is correct |
| Debit | Credit | ||
| Interest Expense | 7250 | ||
| Discount on Bonds Payable | 250 | =5000/20 | |
| Cash | 7000 | =100000*7% |
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