A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The entry to record the first interest payment would include
A. a debit to Cash of $18,000.
B. a debit to Bond Interest Payable of $18,000.
C. a debit to Premium on Bonds Payable of $2,000.
D. a credit to Bond Interest Expense of $16,000.
Answer: C
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