On january 1 a company issues bonds dated january 1 with a

Reference no: EM13581336

On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using straight-line amortization is:

A. Debit Interest Payable $14,000.00; credit Cash $14,000.00.

B. Debit Interest Expense $14,000.00; credit Cash $14,000.00.

C. Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.

D. Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.

E. Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.

Reference no: EM13581336

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