Texxon Corporation issued $500,000 of 8%, 10-year bonds. Interest is paid semiannually. Assume that the market rate for similar investments is 6 percent.

1. The journal entry that would be made when the final payment of $200,000 is made to the bondholders would include:

a. a debit to Premium on Bonds Payable for $68,720

b. a debit to Bonds Payable for $500,000

c. a debit to Cash for $500,000

d. a credit to Premium on Bonds Payable for $20,000