Solderman Company issued $460,000, 8%, 10-year bonds for $442,800 with a market rate of 10%. The effective-interest method of amortization is to be used and interest is paid annually
The journal entry on the first interest payment date would include a:
A) credit to Interest Expense of $36,800.
B) credit to Cash of $44,280.
C) credit to Discount on Bonds Payable of $7480.
D) credit to Interest Expense of $7480.
C
Explanation: C) $442,800 × 10% = $44,280
Cash interest: $460,000 × 8% = $36,800
Discount amortization: $44,280 - $36,800 = $7480
Business
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