A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a ________ to Premium on Bonds Payable for ________ each period.
A)credit;$500
B)debit;$500
C)debit;a greater amount each period
D)credit;a lower amount each period

Question

Quizplus · Accepted Answer

Straight-line amortization = Premium ÷ Number of years
= $5,000 ÷ 10 years = $500 per year
The entry includes a debit to Interest Expense (for the interest payment amount minus the amortization),a debit to Premium on Bonds Payable for $500,and a credit to Cash (for the par value times the stated interest rate).

A 10-Year Bond That Pays Interest Annually Was Issued at a $5,000