Cramer Corp $\begin{array}{lr}\text { Interest Expense } & 900,000 \\\text { Premium on Bonds Payable } & 61,388\\\text { Cash }&961,388\end{array}$

Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. What is the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?

A)
$\begin{array}{lr}\text { Interest Expense } & 900,000 \\\text { Premium on Bonds Payable } & 61,388\\\text { Cash }&961,388\end{array}$
B)
$\begin{array} { l r } \text { Interest Expense } & 961,388 \\\quad \text { Discount on Bonds Payable } & 61,388 \\\text { Cash } & 900,000\end{array}$
C)
$\begin{array} { l l } \text { Bonds Payable } & 961,388\\\text { Cash } & 961,388 \\\end{array}$
D)
$\begin{array} { l r r } \text { Interest Expense } & 838,612 & \\\text { Discount on Bonds Payable } & 61,388 & \\\text { Cash } & & 900,000\end{array}$

Correct Answer:

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