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

question 133

Multiple Choice

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2014. The bonds pay interest on February 28 and August 31. Assume that 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:

Benefit of the Bargain

A principle in contract law that allows a party harmed by a breach to recover the value of what they were promised in the contract.

Rescind

To cancel a contract.

Seller

An individual or entity that offers goods or services for sale to consumers or other businesses.

UCC

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing commercial transactions, including sales of goods and secured transactions, in the United States.