The Collins Company sold $200,000 of 10-year bonds for $190,000. The stated rate on the bonds was 8% and interest is paid annually on December 31. What entry would be made on December 31 when the interest is paid? (Numbers are omitted.)

Question

Quizplus · Accepted Answer

The bonds were sold at a discount, so the interest expense includes both the cash interest paid and the amortization of the discount.

The Collins Company Sold $200,000 of 10-Year Bonds for $190,000