Blanding Company issues $1,000,000 of 8%,10-year bonds at 98 on February 28,2014.The bond pays interest on February 28 and August 31.The market rate of interest on the issuance date was 10%.Assume Blanding uses the straight-line method for amortization.The journal entry to record the first interest payment on August 31,2014 would be a:
A) debit to Cash for $40,000.
B) debit to Interest expense for $41,000.
C) debit to Interest expense for $39,000.
D) debit to Discount on bonds payable for $1,000.

Question

Quizplus · Accepted Answer

B) Calculations: ($1,000,000 × 8% × 6/12) + ($20,000/10) × 6/12 = $41,000

Blanding Company Issues $1,000,000 of 8%,10-Year Bonds at 98 on February