Multiple Choice
On January 1,2013,$1,200,000,5-year,bonds with a stated rate of 10% payable annually were issued for cash of $1,295,844 when the market rate of interest was 8%.The first annual cash interest payment was $120,000 while that period's interest expense was calculated as $103,666.How would the company record the journal entry to record this first annual interest payment?
A) Debit Interest Expense for $103,666,debit Premium on Bonds Payable for $16,334,and credit Cash for $120,000.
B) Debit Interest Expense for $120,000 and credit Cash for $120,000.
C) Debit Interest Expense for $16,334 and credit Cash for $16,334.
D) Debit Interest Expense for $120,000,credit Discount on Bonds Payable for $16,334,and credit Cash for $103,666.
E) Debit Cash for $1,295,844,credit Premium on Bonds Payable for $1,200,000,and credit Premium on Bonds Payable for $95,844.
Correct Answer:

Verified
Correct Answer:
Verified
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