Asked by Seniha Elcik on Jun 09, 2024
Verified
Refer to Exhibit 14-3.The balance of Discount on Bonds Payable after the December 31, 2010, adjusting entry has been posted would be
A) $5, 600
B) $6, 000
C) $7, 000
D) $8, 400
Accrued Interest
Interest that has accumulated but remains unpaid.
Straight-Line Amortization
A method of calculating the depreciation of an asset or the repayment of a loan in equal installments over a specified period of time.
Discount on Bonds Payable
The difference between the face value of a bond and its lower selling price before maturity, reflecting investor perceptions of risk or interest rate differences.
- Locate and inscribe in the financial records the entries pertaining to issuing bonds, incurring costs from interest, and amortizing bonds.
- Analyze the impact of bond premium or discount amortization on the carrying amount of bonds.
Verified Answer
AE
Abria EzellJun 11, 2024
Final Answer :
B
Explanation :
The amount of discount on bonds payable is $7,000 ($400,000 x 9% x 8/12). The straight-line amortization of discount for 2010 would be $1,400 ($7,000 ÷ 5 years ÷ 2 semi-annual periods), and the balance of discount on bonds payable after the adjusting entry would be $6,000 ($7,000 − $1,400).
Learning Objectives
- Locate and inscribe in the financial records the entries pertaining to issuing bonds, incurring costs from interest, and amortizing bonds.
- Analyze the impact of bond premium or discount amortization on the carrying amount of bonds.