객관식
Straight-line amortization of a bond premium or discount can be calculated by taking:
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11. Long Term Liabilities
Straight Line Amortization of Bond Premium or Discount
객관식
Jayster Company issued bonds at a discount. The semi-annual journal entry for interest expense will include:
A
A debit to Discount on Bonds Payable
B
A debit to Premium on Bonds Payable
C
A credit to Discount on Bonds Payable
D
A credit to Premium on Bonds Payable
검증된 단계별 안내1
Understand that when bonds are issued at a discount, the bonds are sold for less than their face value. This discount needs to be amortized over the life of the bond.
Recognize that the semi-annual interest expense entry involves recording the interest expense and adjusting the discount on bonds payable.
Calculate the interest expense using the effective interest rate method, which involves multiplying the carrying amount of the bond by the market interest rate at issuance.
Determine the cash interest payment, which is calculated by multiplying the face value of the bond by the stated interest rate.
The difference between the interest expense and the cash interest payment is the amount of discount amortization, which is credited to the Discount on Bonds Payable account in the journal entry.
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