A.

On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104 resulting in a 4% premium. They had a 20 year term and a stated rate of interest of 7% payable in cash on December 31 of each year. The company amortizes the premium on a straight-line basis. Assuming a straight-line amortization of the premium, the journal entry necessary to recognize interest expense on the December 31, Year 1 is

Account Titles	Debit	Credit
Interest Expense	3,300
Premium on Bonds Payable	100
Cash		3,400

Account Titles	Debit	Credit
Interest Expense	3,600
Premium on Bonds Payable		100
Cash		3,500

Account Titles	Debit	Credit
Interest Expense	3,400
Premium on Bonds Payable	100
Cash		3,500

Account Titles	Debit	Credit
Interest Expense	3,400
Cash		3,400

B.

On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104resulting in a 4% premium. They had a 20 year term and a stated rate of interest of 7%.Based on this information, the carrying value of the bond liability on January 1, Year 6 is

$50,000.

$48,500.

$51,500.

$52,000.