On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.Which of the following will appear on Ace's balance sheet at December 31,2011?

Question

On SEPTEMBER  30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.Which of the following will appear on Ace's balance sheet at December 31,2011?

Quizplus · Accepted Answer

At December 31, 2011, Ace Electronics would have already paid the interest due on September 30, 2011. Therefore, there would be no accrued interest or interest expense at that point. The bond principal amount of $100,000 would still be outstanding, so the correct choice is B, Bonds payable $100,000. Option A is incorrect because the bond was issued at 100, meaning that the company received $100,000 in cash and does not owe any additional interest or principal until maturity. Option C, Bonds payable $2,000, is also incorrect because that is the amount of interest expense for only one semiannual period and not the principal amount outstanding. Option D, Interest expense $2,000, is incorrect because there is no interest expense to record at this time.

On SEPTEMBER 30,2011,Ace Electronics Issued $100,000 of 10-Year,8% Bonds