On January 1, 20X1, Levan Company issued bonds with a coupon rate of 10% (with interest paid once a year) and a face amount of
On January 1, 20X1, Levan Company issued bonds with a coupon rate of 10% (with interest paid once a year) and a face amount of $200,000. The bonds mature in 15 years. The market interest rate for bonds with the same degree of riskiness is 8% compounded annually. These bonds were issued on January 1, 20X1 at a price of $234,238. Coupon payments are made annually on December 31, so the first coupon payment was made on December 31, 20X1. Levan uses the effective-interest method on its books. Which one of the following is included in the journal entry on Levan's books to record the SECOND coupon payment made on December 31, 20X2? o DEBIT to Interest Expense of $18,739 o CREDIT to Discount on Bonds of $1,261 o DEBIT to Interest Expense of $20,000 o DEBIT to Premium on Bonds of $1,362