Banshee Ltd Issues $12 Million in 8-Year,8%,semi-Annual Coupon Debentures B)

Multiple Choice

Banshee Ltd issues $12 million in 8-year,8%,semi-annual coupon debentures.The rate of return required by the market is 12%.What is the journal entry to record the first payment of interest assuming that Banshee uses the effective-interest method to amortise any discount or premium (round to the nearest dollar) ?

A)
$$\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Interest expense } & 574475 & \\\hline \mathrm { Cr } & \text { Debentures } & & 94475 \\\hline \mathrm { Cr } & \text { Cash } & & 480000 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Interest expense } & 385525 & \\\hline \mathrm { Dr } & \text { Debentures } & 94475 & \\\hline \mathrm { Cr } & \text { Cash } & & 480000 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Interest expense } & 636597 & \\\hline \mathrm { Cr } & \text { Debentures } & & 156597 \\\hline \mathrm { Cr } & \text { Cash } & & 480000 \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Interest expense } & 323403 & \\\hline \mathrm { Dr } & \text { Debentures } & 156597 & \\\hline \mathrm { Cr } & \text { Cash } & & 480000 \\\hline\end{array}$$