On January 1, a company issues bonds dated January 1 with a par value of $340,000. 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 12% and the bonds are sold for $327,490. The journal entry to record the first interest payment using straight-line amortization is:

Multiple Choice

• Debit Interest Expense $17,449.00; debit Discount on Bonds Payable $1,251.00; credit Cash $18,700.00.

• Debit Interest Expense $19,951.00; credit Discount on Bonds Payable $1,251.00; credit Cash $18,700.00.

• Debit Interest Expense $19,951.00; credit Premium on Bonds Payable $1,251.00; credit Cash $18,700.00.

• Debit Interest Expense $18,700.00; credit Cash $18,700.00.