On January 1, a company issues bonds dated January 1 with a par value of $360,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $346,096. The journal entry to record the first interest payment using the effective interest method of amortization is:

Debit Interest Expense $17,304.80; credit discount on bonds payable $1,104.8; credit cash $16,200

Interest Expense A/cDr $17,304.80

Discount on bonds payable A/cCr $1104.8

To Cash A/cCr $16,200

Explanation:

Given the following :

Bond value = $346,096

Market rate = 10% = 0.1

Contract rate = 9% = 0.09

Par value = $360,000

Note : Semiannual payment = rate / 2

Calculating the cash value and interest expense:

Cash value :

Par value × contract rate

$360,000 × (0.09/2)

$360,000 × 0.045

= $16,200

Interest expense :

Bond value × market rate

$346,096 × (0.1/2)

$346,096 × 0.05

= $17,304.8

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whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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