On January 1, a company issues bonds dated January 1 with a par value of $390,000. The
Question:
On January 1, a company issues bonds dated January 1 with a par value of $390,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $374,937. The journal entry to record the first interest payment using the effective interest method of amortization is:
Multiple Choice
-
Debit Interest Expense $18,747; credit Discount on Bonds Payable $1,197; credit Cash $17,550.
-
Debit Interest Expense $16,353; debit Discount on Bonds Payable $1,197; credit Cash $17,550.
-
Debit Interest Expense $16,353; debit Premium on Bonds Payable $1,197; credit Cash $17,550.
-
Debit Interest Expense $18,747; credit Premium on Bonds Payable $1,197; credit Cash $17,550.
-
Debit Interest Payable $17,550; credit Cash $17,550.