Explanation: Discount = $400,000 - $383,793 = $16,207 The issued bond is always recorded at par (face) value in the Bonds Payable account, with the difference between par value and issue price recorded as a discount or premium, depending on whether the issue price is greater than par (premium) or less than par (discount).
A) Debit Interest Payable $14,000.00; credit Cash $14,000.00.
B) Debit Interest Expense $14,000.00; credit Cash $14,000.00.
C) Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.
D) Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.
E) Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.
C) Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.
Explanation: Cash payment of interest = $400,000 * .07 * ½ = $14,000
Discount Amortization = $400,000 - $383,793 = $16,207/10 = $1,620.70
Interest Expense = $14,000 + $1,620.70 = $15,620.70
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