Sudan Co. issued a $500,000, 10-year bond dated January 1, 2023. The bond was sold to yield 14% effective interest. The bond pays 12% interest on January 1 and July 1 (semi-annually) each year. What is the journal entry required on December 31, 2025?
1) Debit Interest Expense $31,812; credit Bonds Payable $1,812; credit Interest Payable $30,000
2) No journal entry is required
3) Debit Interest Expense $31,292; credit Bonds Payable $1,292; credit Cash $30,000
4) Debit Interest Expense $31,694; credit Bonds Payable $1,694; credit Interest Payable $30,000