Learning outcome 5 on Jan 1 2016 Carter sales issued 15000 i

Learning outcome 5 on Jan. 1, 2016, Carter sales issued $15,000 in bonds for $15,800 they were eight-year bonds with a stated rate of 9%, and they pay semiannual interest. Carter Sales uses the straight-line method to amortize the hond premium. Immediately atter the issue of the bonds, the ledger balances appeared as follows Question Premium on Bonds Pavable Bonds Payable 15,000 800 After Interest payment on June 30, 2019, what will be the balance In the premlum account? You MUST show your calculations to recelve full credit for thls problem. a. Credit of $650 b. Debit of $250 c. Credit of $450 d. Credit of $550

Solution

Premium on bonds payable = 800 (premium has credit balance)

Premium amortized (800/16*48/12)=200 (Amortization is debited)

Balance in premium account = 650 (credit balance)

Therefore correct answer is option A credit of $650