On 1 January 2017,Carter Sales issued $23,000 in debentures for $18,700.They were six year debentures with a stated rate of 10% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the Debentures discount.Immediately after issue of the debentures,the ledger balances appeared as follows: $\begin{array}{l}
\text { Debentures payable }\
\begin{array}{lll|l}
\hline &&&&\$23,000&& \

\end{array}
\end{array}$ $$\begin{array} { | l | l |}
\hline { \text { Discount on debentures payable } } \
\hline 4300 &\quad\quad\quad \
\hline
\end{array}$$ After the first interest payment on 30 June 2017,what will be the balance in the Discount account?
A)Debit of $4658
B)Debit of $3942
C)Debit of $4300
D)Credit of $358

Question

On 1 January 2017,Carter Sales issued $23,000 in debentures for $18,700.They were six year debentures with a stated rate of 10% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the Debentures discount.Immediately after issue of the debentures,the ledger balances appeared as follows: $\begin{array}{l}
\text { Debentures payable }\
\begin{array}{lll|l}
\hline &&&&\$23,000&& \

\end{array}
\end{array}$ $$\begin{array} { | l | l |} 
\hline  { \text { Discount on debentures payable } } \
\hline 4300 &\quad\quad\quad \
\hline
\end{array}$$ After the first interest payment on 30 June 2017,what will be the balance in the Discount account?
A)Debit of $4658
B)Debit of $3942
C)Debit of $4300
D)Credit of $358

Quizplus · Accepted Answer

The discount on debentures is $4,300, which is amortized over 12 periods (6 years, semiannual). The amortization per period is $4,300 / 12 = $358.33. After the first interest payment, the discount account balance is $4,300 - $358.33 = $3,941.67, rounded to $3942.

On 1 January 2017,Carter Sales Issued $23,000 in Debentures for $18,700.They