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

question 22

Multiple Choice

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $10,900. They were 5-year bonds with a stated rate of 4%, and pay semiannual interest payments. Mahoney Sales uses the straight-line method to amortize the bond premium. Immediately after issue of the bonds, the ledger balances appeared as follows: After the first interest payment on June 30, 2014, what was the balance in the premium account?

• A)Debit of $90
• B)Debit of $600
• C)Credit of $990
• D)Credit of $810

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