On January 2, 2020, $100,000 of 11%, 10-year bonds were issued for $97,000. The $3,000 discount was charged to Interest Expense. The bookkeeper, Mark Landis, records interest only on the interest payment dates of January 1 and July 1. What is the effect on reported net income for 2020 of this error, assuming straight-line amortization of the discount? What entry is necessary to correct for this error, assuming that the books are not closed for 2020?

Question
On January 2, 2020, $100,000 of 11%, 10-year bonds were issued for $97,000. The $3,000 discount was charged to Interest Expense. The bookkeeper, Mark Landis, records interest only on the interest payment dates of January 1 and July 1. What is the effect on reported net income for 2020 of this error, assuming straight-line amortization of the discount? What entry is necessary to correct for this error, assuming that the books are not closed for 2020?

 

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Describe the usefulness and format of the statement of cash flows.

A: Statement of cash flows:Statement of cash flow is a financial statement that shows the cash and cash...

Q: Analyzing the effect of prior-period adjustments Taylor Corporation discovered in 2019 that it had i...

A: Prior period adjustment: It refers to the adjustment made in the current year to rectify the error m...

Q: Differentiate between a defined contribution pensionplan and a defined benefit pension plan. Explain...

A: Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after ...

Q: Journalizing issuance of stock—no-par Wolcott Corporation issued 5,000 shares of no-par common stock...

A: Common stock: These are the ordinary shares that a corporation issues to the investors in order to r...

Q: Campus Cellular provides cell phones and 1 year of cell serviceto students for an upfront, nonrefund...

A: A non-refundable fee of $300 will enable the student to renew the service and normally, it is renewe...

Q: Bernson Corporation is using a predetermined overhead rate that was based on estimated total fixed m...

A: The correct answer is $464,120.

Q: Times-Roman Publishing Company reports the following amounts in its first three years of operation: ...

A: Click to see the answer

Q: Analysis of growth, price-recovery, and productivity components (continuation of 12-21 and 12-22). R...

A: Click to see the answer

Q: How should consolidated financial statements be reported this year when statements of individual com...

A: