A company issued 7%, 15-year bonds with a par value of $480,000 that pay interest semiannually. The market rate on the date of issuance was 7%. The journal entry to record each semiannual interest payment is:
A. Debit Bond Interest Payable $32,000; credit Cash $32,000.
B. Debit Bond Interest Expense $33,600; credit Cash $33,600.
C. Debit Bond Interest Expense $16,800; credit Cash $16,800.
D. Debit Bond Interest Expense $430,000; credit Cash $430,000.
E. No entry is needed, since no interest is paid until the bond is due.
Answer: C
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