Acorporation issues $100,000, 10%, 5-year bonds on january 1, 2007, for $95,800. interest is paid annually on january 1. if the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in december 31, 2007's adjusting entry is
a. $10,840.
b. $10,000.
c. $9,160.
d. $840.

option a) $10,840

Explanation:

Data provided in the question:

Value of bond = $100,000

Bonds issued = $95,800

Interest = 10%

Time period = 5 years

Now,

yearly amortization of the bond discount =

or

=  

or

= $840

Cash payment of interest = $100,000 × 10%

= $10,000

Hence,

the amount of bond interest expense to be recognized in December 31, 2007's adjusting entry = $840 + $10,000

= $10,840

Hence,

The correct answer is option a) $10,840

drop shippers;

a

b

b

a

c

b

d

d

none of these are correct, as they are all sources of american law

a