[The following information applies to the questions displayed below.]On January 1, Year 1, Hanover Corporation issued bonds with a $70,500 face value, a stated rate of interest of 8%, and a 5-year term to maturity. The bonds were issued at 97. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year.The journal entry used to record the interest payment on December 31, Year 2 would be:
A.
| Discount on Bonds Payable | 423 | |
| Cash | 423 |
B.
| Interest expense | 6,063 | |
| Discount on Bonds Payable | 423 | |
| Cash | 5,640 |
C.
| Interest expense | 5,640 | |
| Discount on Bonds Payable | 423 | |
| Cash | 5,217 |
D.
| Interest expense | 423 | |
| Cash | 423 |
Answer: B
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