Find journal entry to record the first interest payment

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Problem 1: On January 1, a company issues bonds dated January 1 with a par value of $720,000. The bonds mature in 3 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $705,000. The journal entry to record the first interest payment using straight-line amortization is:

A. Debit Interest Expense $25,200; credit Premium on Bonds Payable $2,500; credit Cash $22,700.
B. Debit Interest Expense $22,700; debit Discount on Bonds Payable $2,500; credit Cash $25,200.
C. Debit Interest Payable $25,200; credit Cash $25,200.
D. Debit Interest Expense $25,200; credit Cash $25,200.
E. Debit Interest Expense $27,700; credit Discount on Bonds Payable $2,500; credit Cash $25,200

Reference no: EM132802651

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