Mayberry,Inc.,issued $100,000 of 10 year,12% bonds dated April 1,2009,for $102,360 on April 1,2009.The bonds pay interest annually on April 1.Straight-line amortization is used by the company.What entry is needed at April 1,2010 for the first interest payment?
A) $\begin{array} { l r r }
\text { Interest expense } & 11,764 & \
\text { Premium on bonds payable } & 236 & \
\text { Cash } & & 12,000
\end{array}$
B) $\begin{array} { l r }
\text { Interest expense } & 12,236 \
\quad \text { Premium on bonds payable } && 236 \
\text { Cash } & &12,000
\end{array}$
C) $\begin{array} { l r r }
\text { Interest expense } & 12,000 & \
\text { Premium on bonds payable } & 236 & \
\quad \text { Cash } & & 12,236
\end{array}$
D)

$\begin{array} { l r r }
\text { Interest expense } & 12,000 & \
\quad \text { Cash } & & 12,000
\end{array}$

Question

Mayberry,Inc.,issued $100,000 of 10 year,12% bonds dated April 1,2009,for $102,360 on April 1,2009.The bonds pay interest annually on April 1.Straight-line amortization is used by the company.What entry is needed at April 1,2010 for the first interest payment?
A) $\begin{array} { l r r } 
\text { Interest expense } & 11,764 & \
\text { Premium on bonds payable } & 236 & \
\text { Cash } & & 12,000
\end{array}$
B) $\begin{array} { l r } 
\text { Interest expense } & 12,236 \
\quad \text { Premium on bonds payable } && 236 \
\text { Cash } & &12,000
\end{array}$
C) $\begin{array} { l r r } 
\text { Interest expense } & 12,000 & \
\text { Premium on bonds payable } & 236 & \
\quad \text { Cash } & & 12,236
\end{array}$
D)

$\begin{array} { l r r } 
\text { Interest expense } & 12,000 & \
\quad \text { Cash } & & 12,000
\end{array}$

Quizplus · Accepted Answer

The bond premium of $2,360 is amortized over 10 years, resulting in an annual amortization of $236. The interest expense is the cash interest payment of $12,000 minus the premium amortization of $236, resulting in $11,764.

Mayberry,Inc Interest expense 11,764 Premium on bonds payable 236 Cash 12,000\begin{array} { l r r } \text { Interest expense } & 11,764 & \\\text { Premium on bonds payable } & 236 & \\\text { Cash } & & 12,000\end{array} Interest expense Premium on bonds payable Cash ​11,764236​12,000​

Mayberry,Inc $\begin{array} { l r r } \text { Interest expense } & 11,764 & \\\text { Premium on bonds payable } & 236 & \\\text { Cash } & & 12,000\end{array}$