On January 1,2017,Agee Company Issued $85,000 of Five-Year,8% Bonds When $$\begin{array} { | c | r | r | } \hline \text { Interest Expense } & 5,100 & \\\hline \text { Cash } & & 5,100 \\\hline\end{array}$$

question 64

Multiple Choice

On January 1,2017,Agee Company issued $85,000 of five-year,8% bonds when the market interest rate was 12%.The issue price of the bonds was $62,401.Agee uses the effective-interest method of amortization for bond discount.Semiannual interest payments are made on June 30 and December 31 of each year.Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar. )

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Interest Expense } & 5,100 & \\
• \hline \text { Cash } & & 5,100 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 3,744 & \\
• \hline \text { Discount on Bonds Payable } & & 344 \\
• \hline \text { Cash } & & 3,400 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 3,400 & \\
• \hline \text { Discount on Bonds Payable } & 1,700 & \\
• \hline \text { Cash } & & 5,100 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Interest Expense } & 5,100 & \\
• \hline \text { Discount on Bonds Payable } & & 3,400 \\
• \hline \text { Cash } & & 1,700 \\
• \hline
• \end{array}\]

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