On January 1,2010,Tonika Corporation Issued a Four-Year,$10,000,7% Bond $\begin{array}{lr}\text { Interest expense } & 700 \\\text { Cash } & &700 \\\end{array}$

Multiple Choice

On January 1,2010,Tonika Corporation issued a four-year,$10,000,7% bond.The interest is payable annually each December 31.The issue price was $9,668 based on an 8% effective interest rate.Assuming effective-interest amortization is used,which of the following journal entries correctly records the 2010 interest expense (to the nearest dollar) ?

A) Interest expense
700
Cash
700

$\begin{array}{lr}\text { Interest expense } & 700 \\\text { Cash } & &700 \\\end{array}$
B) $\begin{array} { l c } \text { Interest expense } & 883 \\\text { Discount on bonds payable } & &183 \\\text { Cash } && 700\end{array}$
C)
$\begin{array} { l c } \text { Interest expense } & 773 \\\text { Discount on bonds payable } & &73 \\\text { Cash } && 700\end{array}$
D) $\begin{array} { l r r } \text { Interest expense } & 676 & \\\text { Discount on bonds payable } & 24 & \\\text { Cash } & & 700\end{array}$