On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $288,413. The journal entry to record the first interest payment using the effective interest method of amortization is:

a. Debit Interest Expense $14,420.65; credit Discount on Bonds Payable $920.65; credit Cash $13,500.00.

b. Debit Interest Expense $14,420.65; credit Premium on Bonds Payable $920.65; credit Cash $13,500.00.

c. Debit Interest Expense $12,579.35; debit Premium on Bonds Payable $920.65; credit Cash $13,500.00.

d. Debit Interest Expense $12,579.35; debit Discount on Bonds Payable $920.65; credit Cash $13,500.00.

e. Debit Interest Payable $13,500.00; credit Cash $13,500.00.

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