Question

Exam 1 Review 1. Your corporation pays bonuses each year. For 2019, the bonuses eamed were $150,000 and they were paid on April 15, 2020. A. The December 31, 2019 entry will include.. a. Dr. salaries payable 150,000 b. Cr. Cash 150,000 c. Dr. salaries expense 150,000 B. The April 15, 2020 entry will include... a.Cr. cash 150,000 b. Dr. salaries expense 150,000 c. Cr. salaries payable 150,000 2. A company issued $550,000 of 11%, 15-year bonds on January 1, 2020, at 103. Interest is payable semiannually on June 31 and December 31. The company uses the straight-line method of amortization for bond premium or discount A. Is the bond issued at a premium or a discount? B. The issuance of the bond will include... a. Dr. cash 550,000 b. Cr. bonds payable 550,000 c. Dr. premium on bonds payable 16,500 C. The December 31, 2020 entry will include... a. Dr. interest expense 30,250 b. Cr. cash 29,700 c. Dr. premium amortization 550

Answer 1

1. The Entries are:

Dec 31, 2019 Salaries expenses Dr 150,000 To Salaries Payable 150,000 |Apr 15, 2020 Salaries Payable Dr 150,000 To Cash 150,000

Hence,

• A. Option C is Correct
• B. Option A is correct

2.

A.

Jan 1, 2020	Cash Dr	566,500
	To Premium on Bonds Payable		16,500
	To Bonds Payable		550,000
Dec 31, 2020	Premium on Bonds Payable Dr (16500/15*2)	550
	Interest Expense Dr (Balancing Figure)	29,700
	To Cash (550,000*11%*1/2)		30,250

Hence,

• A. Bonds are issued at Premium
• B. Option B is Correct.
• C. Option C is Correct.