January 1 Issued 10-year bonds payable of $1,000,000 at 98. The bonds have a stated interest rate of 6% and pay interest semi-annually on July 1 and January 1.
July 1 Made first semi-annual interest payment to bondholders and amortized discount.
December 31 Accrued interest and amortized discount.
The bonds are issued at 98, so the amount received is 1,000,000X.98 = 980,000. The balance amount of $20,000 is discount on bonds payable. The journal entry is
Cash Dr 980,000
The solution explains the journal entries relating to bond transactions.