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 interest accrual entry at 31 December 2014 would include:

A) no entry at 31 December 2014.
B) a credit to Cash of $26 667.
C) a debit to Interest expense $26 667.
D) a credit to Interest payable of $26 667.