On January 1, Year 1 Residence Company Issued bonds with a $50,000 face value. The bonds were Issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of 7%payable in cash on December 31 of each year. The effective rate of interest was 389%. Assuming Residence uses the effective Interest rate method, the Journal entry necessary to recognize Interest expense on the December 31, Year 1 is Account Titles Deblt Credit Interest Expense 3.447 47 Discount on Bonds Payable Cash 3.400 Account Titles Deblt Credit Interest Expense Discount on Bonds Payable 3,500 47 Cash 3,547 Account Titles Deblt Credit Interest Expense 3,547 47 Discount on Bonds Payable Cash 3,500 Account Titles Deblt Credit Interest Expense 3,547 Cash 3,547