Solder an Company issued 460000 8 10year bonds for 442800 wi

Solder an Company issued $460,000 8%, 10-year bonds for $442,800 with a market rate of 10%. The effective-interest method of amortization is to be used and interest is paid annualty. The journal entry on the first interest payment date would include a O A. credit to Interest Expense of $7480 O B. credit to Discount on Bonds Payable of $7480. O C. credit to Interest Expense of $36,800. O D. credit to Cash of $44,280

Solution

(460000 x 8%) (Carrying Value x 10% Interest Expense - Cash Payment Cash payment Interest Expense Discount Amortization Carrying Value $           442,800 36800 44280 7480 $           450,280 Interest Expense $                  44,280 Discount On bonds payable $                7,480 Cash $              36,800 Ans is B Credt to discount on bonds payable of $7480