On January 1 of Year 1, Lily Company issued a $20,000, 15% bond, at face value. Interest is paidannuallyeach December 31, so the first coupon payment was made on December 31 of Year 1. This bond was retired on January 1 of Year 2,just one day after the first coupon payment was made. The total amount paid to retire this bond was $18,500. Lily uses the effective-interest method on its books. The entry to record the retirement of this bond would include which of the following?

a credit to Bonds Payable of $20,000a credit to Cash of $20,000a debit to Discount on Bonds of $1,500a credit to Discount on Bonds of $1,500a credit to Gain on Bond Retirement of $1,500a credit to Premium on Bonds of $1,500a debit to Premium on Bonds of $1,500a debit to Loss on Bond Retirement of $1,500