On March 1, Brutto Corp.issues a 3 year, 5%, $60,000 bond at face value.Interest is paid semi-annually.The entry to record the first interest payment will include a
A)debit to Bonds Payable of $3,000.
B)debit to Cash of $1,500.
C)credit to Interest Expense of $3,000.
D)debit to Interest Expense of $1,500.

Question

Quizplus · Accepted Answer

The interest payment is calculated as 5% of $60,000, which equals $3,000 annually. Since interest is paid semi-annually, each payment is $1,500 ($3,000 / 2). The entry to record the interest payment includes a debit to Interest Expense for $1,500 and a credit to Cash for $1,500.