On January 2,2014,Mahoney Sales issued $10,000 in bonds for $9,400.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses straight-line method to amortize bond discount.Immediately after issue of the bonds,the ledger balances appeared as follows:
- After the second interest payment on December 31,2014,what was the balance in the discount account?
A) Debit of $540
B) Debit of $720
C) Debit of $480
D) Credit of $660

Question

On January 2,2014,Mahoney Sales issued $10,000 in bonds for $9,400.They were 5-year bonds with a stated rate of 4%,and pay semiannual interest payments.Mahoney Sales uses straight-line method to amortize bond discount.Immediately after issue of the bonds,the ledger balances appeared as follows: 
- After the second interest payment on December 31,2014,what was the balance in the discount account?
A) Debit of $540 
B) Debit of $720 
C) Debit of $480 
D) Credit of $660

Quizplus · Accepted Answer

C) Calculations: $600 - ($600/5) = $480

On January 2,2014,Mahoney Sales Issued $10,000 in Bonds for $9,400