On January 1, a company issues bonds dated January 1 with a par value of $240,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $249,262. The journal entry to record the first interest payment using the effective interest method of amortization is:
a. Debit Bond Interest Expense $12,273.80; debit Premium on Bonds Payable $926.20; credit Cash $13,200.00.
b. Debit Bond Interest Expense 14,126.20; credit Premium on Bonds Payable $926.20; credit Cash $13,200.00.
c. Debit Interest Payable $13,200.00; credit Cash $13,200.00.
d. Debit Interest Expense $12,463.10; debit Premium on Bonds Payable $736.90; credit Cash $13,200.00.
e. Debit Bond Interest Expense $12,463.10; debit Discount on Bonds Payable $736.90; credit Cash $13,200.00.
