The Amazing Widget Company issues $500 000 of 6%, 10- year debentures at 103 on 31 March 2014. The debenture pays interest on 31 March and 30 September. The market rate of interest on the issue date was 4%. Assume the company uses the straight- line method for amortisation. The journal entry to record the issue would include a:
A)credit to Debentures payable for $515 000.
B)credit to Discount on debentures payable for $15 000.
C)debit to Cash for $500 000.
D)debit to Cash for $515 000.

Question

Quizplus · Accepted Answer

The debentures were issued at 103, meaning they were issued at 103% of the face value. Therefore, the cash received is $500,000 * 103% = $515,000.

The Amazing Widget Company Issues $500 000 of 6%, 10-