On January 1, a company issues bonds dated January 1 with a par value of $500,000 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 12 and the bonds are sold for $481,603 The journal entry to record the first interest payment using the effective interest method of amortization is Debit Interest Payable $27,500 credit Cash $27,500 Debit Interest Expense $28,896 credit Premium on Bonds Payable $1,396 credit Cash $27,500 Debit Interest Expense $28,896 credit Discount on Bonds Payable $1,396 credit Cash $27,500 Debit Interest Expense $26,104 debit Premium on Bonds Payable $1,396 credit Cash $27,500 Debit Interest Expense $26,104 debit Discount on Bonds Payable $1,396 credit Cash $27,500

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Question: On January 1, a company issues bonds dated January 1 with a par value of $500,000. The bonds mature in 5 years. The contract rate

On January 1, a company issues bonds dated January 1 with a par value of $500,000. 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 12% and the bonds are sold for $481,603. The journal entry to record the first interest payment using the effective interest method of amortization is:

Debit Interest Payable $27,500; credit Cash $27,500.
Debit Interest Expense $28,896; credit Premium on Bonds Payable $1,396; credit Cash $27,500.
Debit Interest Expense $28,896; credit Discount on Bonds Payable $1,396; credit Cash $27,500.
Debit Interest Expense $26,104; debit Premium on Bonds Payable $1,396; credit Cash $27,500.
Debit Interest Expense $26,104; debit Discount on Bonds Payable $1,396; credit Cash $27,500.

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