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mr Goodwill [35]
3 years ago
12

On January 1, 2016, Tonika Company issued a four-year, $10,000, 7% bond. The interest is payable annually each December 31. The

issue price was $9,668 based on an 8% effective interest rate. Tonika uses the effective-interest amortization method. Rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2016 interest expense?
A. Interest expense 700
Cash 700

B. Interest expense 883
Discount on bonds payable 183
Cash 700

C. Interest expense 773
Discount on bonds payable 73
Cash 700

D. Interest expense 676
Discount on bonds payable 24
Cash 700


a. Option A
b. Option B
c. Option C
d. Option D
Business
1 answer:
disa [49]3 years ago
3 0

Answer:

Option C is correct one.

Interest expense 773

Discount on bonds payable 73

Cash 700

Explanation:

2016 interest expense  = initial issue price, which is the 1/1/2014 book value x the market (effective) interest rate

= $9,668 x 08

= $773

Cash interest payment

= maturity value of the bond x the stated interest rate = $10,000 x .07

= $700  

Amortization of discount on bonds payable

= interest expense - interest cash payment

= $773 - $700.

= $73  

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Answer:

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Explanation:

The Question is incomplete. I have provided the missing part of the question below.

Date Activities Units Acquired at Cost Units Sold at Retail

Mar. 1  Beginning inventory  150 units  $52.00/unit    

Mar. 5  Purchase  250 units  $57.00/unit    

Mar. 9  Sales      310 units  $87.00/unit

Mar. 18  Purchase  110 units  $62.00/unit    

Mar. 25  Purchase  200 units  $64.00/unit    

Mar. 29  Sales      180 units  $97.00/unit

     Totals  710 units   490 units

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Answer:

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