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

Multiple Choice

Blanding Company issues $1 000 000 of 8%, 10- year debentures at 98 on 28 February 2014. The debenture pays interest on 28 February and 31 August. The market rate of interest on the issue date was 10%. Assume Blanding uses the straight- line method for amortisation. The journal entry to record the first interest payment on 31 August 2014 would be a:

A) debit to Discount on debentures payable for $1 000.
B) debit to Cash for $40 000.
C) debit to Interest expense for $39 000.
D) debit to Interest expense for $41 000.