The Duros Corp issued a $1,000,000, 5%, 10 year bond at 105. This pays interest annually and the company uses a straight-line amortization for all premiums and discounts.

Which entry properly reflects the payment of the first year of interest and proper treatment of the premium or discount (if applicable)?

Question 9 options:

Interest Expense 50000 Cash 50000

Interest Expense 55000 Discount on Bonds Payable 5000 Cash 50000

Interest Expense 47500 Premium on Bonds Payable 5000 Cash 52500

Interest Expense 45000 Premium on Bonds Payable 5000 Cash 50000