On January 1, 2019, Tonika Company issued a four-year, $10,700, 7% bond. The interest is payable annually each December 31. The
issue price was $10,018 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 2019 interest expense? A. Interest expense 1,052
Bond discount 205
Cash 847
B. Interest expense 847
Cash 847
C. Interest expense 805
Bond discount 42
Cash 847
The interest expense is calculated based on effective interest rate. The issue price is 10,018 which is the actual price and with effective interest rate interest amount is determined. The interest expense has cash value and bond discount.
The nations selling the gasoline would be in trouble. They would earn less money and the possibility of a depression like the one the US had under Hoover and FDR would occur.
