On January 1, ABC, Inc., issued $100,000 of 10%, 5-year bonds on January 1, 2018, for $92,280. Interest is due semiannually. When ABC records the first interest payment, which will be greater the debit to Interest Expense or the credit to Cash?
A. The debit to Interest Expense will be greater because the market rate is less than the stated interest rate.
B. The debit to Interest Expense will be greater because the market rate is greater than the stated interest rate.
C. The debit to Interest Expense will be less because the market rate is greater than the stated interest rate.
D. The debit to Interest Expense will be lower because the market rate is less than the stated interest rate.
Answer: B
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