On January 1, a company issues bonds dated January 1 with a par value of $240,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $249,262. The journal entry to record the issuance of the bond is:
A. Debit Cash $249,262; credit Bonds Payable $249,262.
B. Debit Bonds Payable $240,000; debit Bond Interest Expense $9262; credit Cash $249,262.
C. Debit Cash $249,262; credit Premium on Bonds Payable $9262; credit Bonds Payable $240,000.
D. Debit Cash $249,262; credit Discount on Bonds Payable $9262; credit Bonds Payable $240,000.
E. Debit Cash $240,000; debit Premium on Bonds Payable $9262; credit Bonds Payable $249,262.
Answer: C
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