## 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