On January 1, a company issues bonds dated January 1 with a par value of $480,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $461,461. The journal entry to record the first interest payment using straight-line amortization is:
A. Debit Interest Expense $23,453.90; credit Discount on Bonds Payable $1853.90; credit Cash $21,600.00.
B. Debit Interest Expense $23,453.90; credit Premium on Bonds Payable $1853.90; credit Cash $21,600.00.
C. Debit Interest Expense $21,600.00; credit Cash $21,600.00.
D. Debit Interest Expense $19,746.10; debit Discount on Bonds Payable $1853.90; credit Cash $21,600.00.
E. Debit Interest Payable $21,600.00; credit Cash $21,600.00.
Answer: A
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