On January 1, 2015, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable,Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that wasissued when the market interest rate was 6 percent. Assuming that interest is paid December 31each year, prepare the journal entry to record interest paid on December 31, 2015, using the simplified effective-interest method shown in Chapter Supplement 10C.

Question

On January 1, 2015, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable,
Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was
issued when the market interest rate was 6 percent. Assuming that interest is paid December 31
each year, prepare the journal entry to record interest paid on December 31, 2015, using the simplified effective-interest method shown in Chapter Supplement 10C.

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