On 2 January 2014, Mahoney Sales issued $10 000 in debentures for $10 900. They were 5- year debentures with a stated rate of 4%, and pay half- yearly interest payments. Mahoney Sales uses the straight- line method to amortise the debenture premium. After the first interest payment on 30 June 2014, what was the debenture carrying amount?
A)$10 810
B)$9 190
C)$9 810
D)$9 100

Question

Quizplus · Accepted Answer

The debenture premium is $900 ($10,900 - $10,000) and is amortized over 5 years, or 10 periods, using the straight-line method. The amortization per period is $90 ($900/10). After the first interest payment, the carrying amount is $10,900 - $90 = $10,810.

On 2 January 2014, Mahoney Sales Issued $10 000 in Debentures