On January 1,your Company Issues a 5-Year Bond with a Face

Multiple Choice

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Your company used the effective-interest method of amortization.At the end of the first year,your company should:

A) debit Interest Expense for $543.30,debit Premium on Bonds Payable for $156.70,and credit Interest Payable for $700.
B) debit Interest Expense for $700,credit Premium on Bonds Payable for $156.70,and credit Interest Payable for $543.30.
C) debit Interest Expense for $700,debit Premium on Bonds Payable for $156.70,and credit Interest Payable for $543.30.
D) debit Interest Expense for $543.30 and credit Interest Payable for $543.30.