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Homework answers / question archive / On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400

Accounting

On January 2, 2014, Mahoney Sales issued $10,000 in bonds for $9,400. They were 5-year bonds with a stated rate of 4% and pay annual interest payments. Mahoney uses the straight-line method to amortize the bond discount. Immediately after the bond issuance, the ledger balances appeared as follows:

 

Bonds payable

 

Discount on bonds payable

10,000

 

600

 

After the first interest payment on January 2, 2015, what was the balance in the discount account?

    1. Debit of $480
    2. Credit of $480
    3. Debit of $720
    4. Credit of $120

 

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