Find the 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 $210,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $218,105. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.)

Multiple Choice

Option 1: Debit Bond Interest Expense $12,361; credit Discount on Bonds Payable $811; credit Cash $11,550.
Option 2: Debit Bond Interest Expense $10,739; debit Discount on Bonds Payable $811; credit Cash $11,550.
Option 3: Debit Bond Interest Expense $10,739; debit Premium on Bonds Payable $811; credit Cash $11,550.
Option 4: Debit Bond Interest Expense $12,361; credit Premium on Bonds Payable $811; credit Cash $11,550.
Option 5: Debit Interest Payable $11,550; credit Cash $11,550.

Reference no: EM132935192

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