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Brooke Fiore
on Dec 16, 2024

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On January 1 Wellness Corporation issues $3000000 5-year 12% bonds at 95 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

A) debit to Interest Expense $180000.
B) debit to Interest Expense $360000.
C) credit to Discount on Bonds Payable $30000.
D) credit to Discount on Bonds Payable $15000.

Straight-Line Method

The straight-line method is a depreciation technique that allocates an even amount of depreciation expense over the useful life of an asset.

Amortization of Bond Discount

The gradual reduction or write-off of the difference between the face value and the lower issuing price of a bond over its term, impacting the issuer's financial statements.

Interest Expense

The financial obligation incurred from borrowing money over a set time frame.

  • Compute the bond interest cost by applying both the effective-interest and straight-line methods.
  • Master the application of the straight-line method for the amortization of bond discounts and premiums.
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Caroline Lopez MelendezDec 22, 2024
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