On January 1, a company issues bonds dated January 1 with a par value of $460,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $441,361. The journal entry to record the issuance of the bond is:
A. Debit Cash $441,361; debit Premium on Bonds Payable $18,639; credit Bonds Payable $460,000.
B. Debit Cash $460,000; credit Discount on Bonds Payable $18,639; credit Bonds Payable $441,361.
C. Debit Cash $441,361; credit Bonds Payable $441,361.
D. Debit Cash $441,361; debit Discount on Bonds Payable $18,639; credit Bonds Payable $460,000.
E. Debit Bonds Payable $460,000; debit Bond Interest Expense $18,639; credit Cash $478,639.
Answer: D
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