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Tarazi Company issued bonds with a coupon rate of 10% and a face amount of $200,000. The bonds mature in 15 years. The market interest

Tarazi Company issued bonds with a coupon rate of 10% and a face amount of $200,000. The bonds mature in 15 years. The market interest rate for bonds with the same degree of riskiness is 8% compounded annually. Coupon payments are made annually on December 31, so the first coupon payment was made on December 31 of Year 1. Tarazi uses the effective-interest method on its books.

The journal entry to record the first coupon payment made on December 31 of Year 1 includes a

Debit to Interest Expense of $20,000

Debit to Interest Expense of $18,739

Debit to Premium on Bonds of $1,362

Credit to Discount on Bonds of $1,261

Debit to Premium on Bonds of $18,638

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