Question - Consider the following example. Bonds with a term of 5 years and face value of $1,000,000 are issued on January 1, 2017 for the amount of $900,000. The contract rate of interest is 10%. Market rate of interest is 12%. Interest is paid annually on December 31.
What is the issuance of bonds on January 1 and Interest Expense on December 31? Discount or premium as applicable is amortized over a straight- line basis. Record your answer using the following format for your entry:
Date
Debit Account Name
Credit Account Name