Lassen Corporation issued ten-year term bonds on January 1,20x5,with a face value of $800,000.The face interest rate is 8 percent and interest is payable semi-annually on June 30 and December 31.The bonds were issued for $690,960 to yield an effective annual rate of 10 percent.The effective interest method of amortization is to be used.The entry on June 30,20x5,to record the payment of interest and amortization of discount is:

Question

Quizplus · Accepted Answer

On June 30, 20x5, the entry to record the payment of interest and amortization of discount is:

Interest expense = 800,000 x 8% x 6/12 = $32,000
Discount amortization = ($690,960 - $800,000) / 20 = $5,506

Therefore, the entry would be:
Debit Interest Expense $32,000
Debit Discount on Bonds Payable $5,506
Credit Cash $37,506

Option A is incorrect because it only records the interest expense and does not account for the amortization of discount.
Option C is incorrect because it only records the amortization of discount and does not account for the interest expense.
Option D is incorrect because it records the incorrect amount of discount amortization.

Lassen Corporation Issued Ten-Year Term Bonds on January 1,20x5,with a Face