Blanding Company issues $1 000 000 of 8%, 10- year debentures at 98 on 28 February 2014. The debenture pays interest on 28 February and 31 August. The market rate of interest on the issue date was 10%. Assume Blanding uses the straight- line method for amortisation. The interest accrual entry at 31 December 2014 would include:
A)no entry at 31 December 2014.
B)a credit to Cash of $26 667.
C)a debit to Interest expense $26 667.
D)a credit to Interest payable of $26 667.

Question

Quizplus · Accepted Answer

The interest accrual entry at 31 December 2014 would include a credit to Interest payable of $26,667, as interest is accrued but not yet paid.

Blanding Company Issues $1 000 000 of 8%, 10- Year