Question

On January 1, your company issues a 5-year bond with a foce value of $10,000 and a stated interest rate of 6%. The market interest rate is 4%. The issue price of the bond was $10,896. Your company used the effective interest method of amortization. At the end of the first year, your company should Multiple Choice Ο debit interest Expense for $600. debit Premium on Bonds Payable for $16400 and credit interest Payable for $436 00 Ο debt interest Expense for $436.00. debit Premium on Bonds Payable for $164.00 and credit Cash for $600. Ο debit interest Expense for 1600, credit Premium on Bonds Payable for $16400 and credit interest Payable for $436.00 Ο debit interest Expense for $435.00 and credit interest Payable for $436 00

Answer 1

Answer
The correct option is B
Explanation
interest expense		DR	$     436
premium on bonds		DR	$     164
cash		CR		$     600
debit interest expense for $436,debit premium on bonds payable
for $164 ,and credit interest payable for $600