Asked by Victoria Overbey on May 08, 2024
Verified
On March 1, Brutto Corp.issues a 3 year, 5%, $60,000 bond at face value.Interest is paid semi-annually.The entry to record the first interest payment will include a
A) debit to Bonds Payable of $3,000.
B) debit to Cash of $1,500.
C) credit to Interest Expense of $3,000.
D) debit to Interest Expense of $1,500.
Interest Expense
The cost incurred by an entity for borrowed funds over a period, included on the income statement.
Bonds Payable
Long-term liabilities representing money a company owes to bondholders, to be repaid at some future date plus interest.
Semi-Annually
Occurring twice a year or every six months, typically used in relation to payments, reports, or interest accruals.
- Comprehend the accounting entries for bond interest payments and the differentiation between carrying amount and interest paid amounts.
Verified Answer
GS
GULANDA SAXTONMay 14, 2024
Final Answer :
D
Explanation :
The interest payment is calculated as 5% of $60,000, which equals $3,000 annually. Since interest is paid semi-annually, each payment is $1,500 ($3,000 / 2). The entry to record the interest payment includes a debit to Interest Expense for $1,500 and a credit to Cash for $1,500.
Learning Objectives
- Comprehend the accounting entries for bond interest payments and the differentiation between carrying amount and interest paid amounts.
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