A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is:
A) Debit Bond Interest Expense $22,000; credit Cash $22,000.
B) Debit Bond Interest Expense $44,000; credit Cash $44,000.
C) Debit Bond Interest Payable $22,000; credit Cash $22,000.
D) Debit Bond Interest Expense $550,000; credit Cash $550,000.
E) No entry is needed, since no interest is paid until the bond is due.
A) Debit Bond Interest Expense $22,000; credit Cash $22,000.
Explanation: $550,000 * .08 * ½ year = $22,000
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