Question

select all that apply
abc company issues a bond with a face value of $100,000 at face amount on january 1. abc prepares financial statements only at december 31, so no adjusting entries are made during the year to accrue interest. if the bond carries a stated interest rate of 6 percent payable in cash on december 31 of each year, the journal entry to record the first bond interest payment includes which of the following? (more than one answer may be correct.)
□ a credit to cash of $6,000
□ a credit to interest expense of $6,000
□ a debit to interest payable of $6,000
□ a debit to interest expense of $6,000

Explanation:

When a bond is issued at face value and no adjusting entries are made during the year to accrue interest, the interest expense is calculated as \( \text{Face Value}\times\text{Stated Interest Rate} \). Here, \( \$100,000\times6\%=\$6,000 \).
The journal entry for paying bond interest is:

• Debit Interest Expense (an expense account, which increases with a debit) for \( \$6,000 \).
• Credit Cash (an asset account, which decreases with a credit) for \( \$6,000 \).

Answer:

A. A credit to Cash of $6,000
D. A debit to Interest expense of $6,000