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mr Goodwill [35]
2 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]2 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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3 years ago
Selected information from Peridot Corporation's accounting records and financial statements for 2021 is as follows ($ in million
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Peridot should report net cash outflows from investing activities of $26 million

Explanation:

Prepare a Cash flow from Investing Activity Section as follows :

<u>Cash flow from Investing Activity  </u>

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Purchase of Machinery                                             (31)

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3 0
3 years ago
What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%? a. $16,576 b. $19,334
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Answer:

The correct answer is E.

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Giving the following information:

Ordinary annuity with 10 payments of $2,700. The interest rate is 5.5%.

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4 0
3 years ago
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