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

question 46

Multiple Choice

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.

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Definitions:

Profitability

The ability of a business or activity to generate a profit or financial gain, indicating its financial health and success.

Confirmation Bias

The habit of understanding new data as validation of one's current convictions or propositions.

Marketing Research

The process of gathering, analyzing, and interpreting information about a market, including products, services, and consumers.

Escalation Of Commitment

A behavioral pattern where individuals continue to invest in a decision despite new evidence suggesting it may be wrong, often due to sunk costs.