McDonald Sales Prepared a Debenture Issue of $20 000 Dated

question 61

Multiple Choice

McDonald Sales prepared a debenture issue of $20 000 dated 1 January 2013. The debentures have a stated rate of 3% and a term of 6 years. The debenture issue was delayed, and the debentures were finally sold on 1 March 2013 at par. On 30 June 2013, the first half- yearly interest payment is made. The journal entry to record that interest payment will include which of the following line items?

• A)Credit Interest payable for $100
• B)Debit Interest expense for $200
• C)Credit Cash for $200
• D)Debit Cash for $300

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Definitions:

Earning Power

The ability of a business to generate net income consistently over time.

Debt Securities

Financial instruments representing a loan made by an investor to a borrower, typically including terms for interest payments and the return of principal.

Liquidity Risk

The risk arising from the difficulty of selling an asset without causing a significant movement in its price and losing value.

Stock Exchange

A marketplace where securities, including stocks and bonds, are bought and sold by traders.