On January 1, a company issues bonds dated January 1 with a par value of $330,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $343,395. The journal entry to record the issuance of the bond is:
A. Debit Cash $330,000; debit Premium on Bonds Payable $13,395; credit Bonds Payable $343,395.
B. Debit Cash $343,395; credit Bonds Payable $343,395.
C. Debit Cash $343,395; credit Discount on Bonds Payable $13,395; credit Bonds Payable $330,000.
D. Debit Cash $343,395; credit Premium on Bonds Payable $13,395; credit Bonds Payable $330,000.
E. Debit Bonds Payable $330,000; debit Bond Interest Expense $13,395; credit Cash $343,395.
Answer: D. Debit Cash $343,395; credit Premium on Bonds Payable $13,395; credit Bonds Payable $330,000.
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