On January 1, a company issued and sold a $409,000, 6%, 10-year bond payable, and received proceeds of $404,000. 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:
Debit Bond Interest Expense $12,270; credit Cash $12,270.
Debit Bond Interest Expense $24,540; credit Cash $24,540.
Debit Bond Interest Expense $12,520; credit Cash $12,270; credit Discount on Bonds Payable $250.
Debit Bond Interest Expense $12,270; debit Discount on Bonds Payable $250; credit Cash $12,520.
Debit Bond Interest Expense $12,020; debit Discount on Bonds Payable $250; credit Cash $12,270.