60.1K

Verified Solution

Link Copied!

On January 1, 2011, Air New Jersey Inc. issued $5000 in principal of 3-year bonds with a 3% stated interest rate and semi-annual payments (non-amortizing debt). The bond was sold at a $533 discount to par, which implied a 7% market interest rate. The following information is from the bond's amortization table:

Payment	Beginning carrying value	Effective interest	Discount amortization	Ending carrying value
1/1/2011				$4,467
6/30/2011	$4,467	$156	$81	$4,548
12/31/2011	$4,548	$159	$84	$4,633
6/30/2012

Which three of the following lines comprised the journal entry for the first interest payment?

On January 1, 2011, Air New Jersey Inc. issued $5000 in principal of 3-year bonds with a 3% stated interest rate and semi-annual payments (non-amortizing debt). The bond was sold at a $533 discount to par, which implied a 7% market interest rate. The following information is from the bond's amortization table:

Payment	Beginning carrying value	Effective interest	Discount amortization	Ending carrying value
1/1/2011				$4,467
6/30/2011	$4,467	$156	$81	$4,548
12/31/2011	$4,548	$159	$84	$4,633
6/30/2012

Which three of the following lines comprised the journal entry for the first interest payment?

Dr. Debt Payable $81

Dr. Interest Expense $175

Cr. Cash $156

Cr. Cash $75

Dr. Discount on Debt Payable $81

Cr. Discount on Debt Payable $81

Cr. Cash $175

Dr. Interest Expense $156

Answer & Explanation Solved by verified expert

See Answer