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On January 1, 2019, Tonika Company issued a four-year, $10,800, 7% bond. The interest is payable annually each December 31. The issue price was $10,068 based on an 8% effective interest rate. Tonika uses the effective-interest amortization method. Rounding calculations to the nearest whole dollar, what is journal entries correctly records the 2019 interest expense?

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Answer:

Dr Interest Expense $805.44

Cr Cash $756

Cr Discount amortization $49.44

Explanation:

Preparation of the journal entries to correctly records the 2019 interest expense

Based on the information given the journal entries to correctly records the 2019 interest expense will be :

Dr Interest Expense $805.44

($10,068 * .08)

Cr Cash $756

($10,800 * .07)

Cr Discount amortization $49.44

($805.44-$756)

(To record Interest Expense)

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