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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:

The correct answer is the option B: False.

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Answer:

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7 0
3 years ago
Read 2 more answers
The stock of Big Joe's has a beta of 1.64 and an expected return of 13.30 percent. The risk-free rate of return is 5.8 percent.
larisa86 [58]

Answer:

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Explanation:

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The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,

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We will first calculate the market risk premium using the required rate of return for stock, beta and risk free rate and plugging these values in the formula above.

0.1330 = 0.058 + 1.64 * rpM

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7 0
3 years ago
Taylor takes her employees' opinions into consideration via reasoning and discussion when making departmental decisions. Which o
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<u>Full question:</u>

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