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Assume that on May 1, 2005, Austin Company issues, at 105 plus accrued interest, 10-year bonds with a face value of $100,000 and a face interest rate of 10 percent. Interest is paid semiannually on June 30 and December 31. The bond is dated January 1, 2005, and will be due on January 1, 2015. What is the amount credited to Premium on Bonds in the journal entry for the bond issue?

a) $833.

b) $1,667.

c) $3,333.

d) $5,000.

 

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