On January 1, a company issues bonds dated January 1 with a par value of $350,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $364,930. The journal entry to record the issuance of the bond is:
A. Debit Cash $364,930; credit Bonds Payable $364,930.
B. Debit Cash $364,930; credit Discount on Bonds Payable $14,930; credit Bonds Payable $350,000.
C. Debit Cash $350,000; debit Premium on Bonds Payable $14,930; credit Bonds Payable $364,930.
D. Debit Cash $364,930; credit Premium on Bonds Payable $14,930; credit Bonds Payable $350,000.
E. Debit Bonds Payable $350,000; debit Bond Interest Expense $14,930; credit Cash $364,930.
Answer: D
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