17
May
May
Porter Company received proceeds of $211,500 on 10-year, 8% bonds issued on January 1, 2006. The bonds had a face value of $200,000, pay interest annually on December 31st, and have a call price of 102. Porter uses the straight-line method of amortization.
What’s the amount of interest expense Porter will show with relation to these bonds for the year ended December 31, 2007?
$16,000
$12,550
$14,850
$16,920
Answer:
When Porter issued the bonds, you
Dr Cash $211,500
Cr Bond premium $11,500
Cr Bonds payable $200,000
Since the straight-line method is used, at each interest payment date, the journal entry is the same:
Dr Interest expense $14,850 - Answer
Dr Bond premium $1,150
Cr Cash $16,000
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