Monday, 17 March 2014

On January 1, 2009, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued when the market interest rate was 6 percent. Assuming that interest is paid December 31 each year. Required: Prepare the journal entry to record interest paid on December 31, 2009, using the simplified effective-interest method shown in chapter supplement 10C. (Omit the "$" sign in your response.) General Journal Debit Credit Dec. 31 2009 Interest expense Cash Bonds payable, net ________________________________________ Explanation: Dec. 31 2009: Interest Expense: ($95,000 × 6% × 12/12) = 5,700 Cash: ($100,000 × 5% × 12/12) = 5000 Bonds Payable: ($5,700 – $5,000) = 700


On January 1, 2009, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued when the market interest rate was 6 percent. Assuming that interest is paid December 31 each year.


Required:
Prepare the journal entry to record interest paid on December 31, 2009, using the simplified effective-interest method shown in chapter supplement 10C. (Omit the "$" sign in your response.)


General Journal
Debit
Credit
  Dec. 31 2009
  Interest expense



       Cash



       Bonds payable, net





Explanation:
Dec. 31 2009:
Interest Expense: ($95,000 × 6% × 12/12) = 5,700
Cash: ($100,000 × 5% × 12/12) = 5000
Bonds Payable: ($5,700 – $5,000) = 700