On January 1, a company issued and sold a $405,000, 5%, 10-year bond payable, and received proceeds of $400,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is (closest to):
- Debit Bond Interest Expense $10,375; credit Cash $10,125; credit Discount on Bonds Payable $250.
- Debit Bond Interest Expense $20,250; credit Cash $20,250.
- Debit Bond Interest Expense $9,875; debit Discount on Bonds Payable $250; credit Cash $10,125.
- Debit Bond Interest Expense $10,125; debit Discount on Bonds Payable $250; credit Cash $10,375.
- Debit Bond Interest Expense $10,125; credit Cash $10,125.