On the First Day of the Fiscal Year, Lisbon Co

Multiple Choice

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight-line method) for the year by Lisbon Co. includes a debit to​

A) Interest Expense for $2,500
B) Premium on Bonds Payable for $2,500
C) Interest Expense for $5,000
D) Premium on Bonds Payable for $5,000