D is corrent. To determine the net cash received from the bond issuance, the solutions approach is to prepare the journal entry for the issuance. | Cash | ? | | | Bond issue costs | 10,000 | | | | Premium on bonds payable | | 6,000 | | | Bonds payable | | 200,000 | | | Interest expense | | 3,000 |
The bonds were issued at 103 ($200,000 × 1.03 = $206,000), so the premium is $6,000 ($206,000 – $200,000). The accrued interest covers the 2 months from 1/1 to 3/1 ($200,000 × 9% × 2/12 = $3,000). The net cash received includes the $206,000 for the bonds and the $3,000 for the accrued interest, less the $10,000 paid for bond issue costs ($206,000 + $3,000 – $10,000 = $199,000). A is incorrect. To determine the net cash received from the bond issuance, the solutions approach is to prepare the journal entry for the issuance. | Cash | ? | | | Bond issue costs | 10,000 | | | | Premium on bonds payable | | 6,000 | | | Bonds payable | | 200,000 | | | Interest expense | | 3,000 |
The bonds were issued at 103 ($200,000 × 1.03 = $206,000), so the premium is $6,000 ($206,000 – $200,000). The accrued interest covers the 2 months from 1/1 to 3/1 ($200,000 × 9% × 2/12 = $3,000). The net cash received includes the $206,000 for the bonds and the $3,000 for the accrued interest, less the $10,000 paid for bond issue costs ($206,000 + $3,000 – $10,000 = $199,000). B is incorrect. To determine the net cash received from the bond issuance, the solutions approach is to prepare the journal entry for the issuance. | Cash | ? | | | Bond issue costs | 10,000 | | | | Premium on bonds payable | | 6,000 | | | Bonds payable | | 200,000 | | | Interest expense | | 3,000 |
The bonds were issued at 103 ($200,000 × 1.03 = $206,000), so the premium is $6,000 ($206,000 – $200,000). The accrued interest covers the 2 months from 1/1 to 3/1 ($200,000 × 9% × 2/12 = $3,000). The net cash received includes the $206,000 for the bonds and the $3,000 for the accrued interest, less the $10,000 paid for bond issue costs ($206,000 + $3,000 – $10,000 = $199,000). C is incorrect. To determine the net cash received from the bond issuance, the solutions approach is to prepare the journal entry for the issuance. | Cash | ? | | | Bond issue costs | 10,000 | | | | Premium on bonds payable | | 6,000 | | | Bonds payable | | 200,000 | | | Interest expense | | 3,000 |
The bonds were issued at 103 ($200,000 × 1.03 = $206,000), so the premium is $6,000 ($206,000 – $200,000). The accrued interest covers the 2 months from 1/1 to 3/1 ($200,000 × 9% × 2/12 = $3,000). The net cash received includes the $206,000 for the bonds and the $3,000 for the accrued interest, less the $10,000 paid for bond issue costs ($206,000 + $3,000 – $10,000 = $199,000). |
