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  3. on january 1, a company issues bonds dated january

On January 1, a company issues bonds dated January 1 with a par value of...

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Accounting

On January 1, a company issues bonds dated January 1 with a par value of $420,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $403,778. The journal entry to record the first interest payment using straight-line amortization is:

Multiple Choice

a. Debit Interest Expense $20,522.20; credit Premium on Bonds Payable $1,622.20; credit Cash $18,900.00.

b. Debit Interest Expense $17,277.80; debit Discount on Bonds Payable $1,622.20; credit Cash $18,900.00.

c. Debit Interest Expense $18,900.00; credit Cash $18,900.00.

d. Debit Interest Expense $20,522.20; credit Discount on Bonds Payable $1,622.20; credit Cash $18,900.00.

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