11. Long Term Liabilities
Zero Coupon Bonds
Multiple Choice
Multiple ChoiceOn January 1, ABC Company issues $1,000,000 of zero coupon bonds at 75. The bonds mature in five years. Assuming that ABC uses the straight-line method for amortization of bond premiums and discounts, the journal entry at the end of the first year would include:
A
A credit to Cash of $50,000
B
A credit to Interest Payable of $50,000
C
A credit to Discounts on Bonds Payable of $50,000
D
A credit to Bonds Payable of $50,000
E
None of the above
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