On January 1, 2010, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96. Six years later, on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 105. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight-line method is used to amortize any bond discount. What is the journal entry to record the first interest payment on June 30, 2010?

Select one:

a. Interest Expense............. 36,000 Cash............ 36,000

b. Cash............ 36,000 Interest Expense............. 36,000

c. Interest Expense................. 36,000 Discount on Bonds Payable..... 1,077 Cash.................... 37,077

d. Interest Expense................. 36,000 Premium on Bonds Payable..... 1,077 Cash.................... 37,077

e. Interest Expense................. 37,077 Discount on Bonds Payable..... 1,077 Cash.................... 36,000