On January 1, 2017, Ahrens Services issued $169,000 of six-year, 12% bonds when the market interest rate was 11%
The bonds were issued for $172,000. Ahrens uses the effective-interest method to amortize the bond premium. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest payment? (Round your answers to the nearest dollar number.)
A)
Interest Expense 9,295
Cash 9,295
B)
Interest Expense 9,295
Discount on Bonds Payable 845
Cash 10,140
C)
Interest Expense 9,460
Premium on Bonds Payable 680
Cash 10,140
D)
Cash 10,140
Premium on Bonds Payable 845
Interest Expense 9,295
C .Interest Expense = $172,000 x 11% x 6/12 = $9,460
Cash paid = $169,000 x 12% x 6/12 = 10,140
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