A company issues 6%,10 year bonds with a par value of $500,000 at 98.The current market rate of interest is 7%.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

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The first interest payment is for the period from the issuance date (assumed to be January 1) to June 30. Therefore, the interest payment is calculated as follows:
$500,000 par value x 6% coupon rate x (181/365 days) = $14,986.30
Since the bonds were issued at 98, the discount on the bonds is $10,000 ($500,000 par value x (100-98)% issue price). Using the straight-line method, the discount amortization for the first interest period is $493 ($10,000 discount ÷ 20 semi-annual periods). Therefore, the journal entry to record the first interest payment on June 30 is:
Dr. Interest Expense $15,479.30
Cr. Cash $15,479.30
($14,986.30 for coupon interest + $493 for discount amortization)

A Company Issues 6%,10 Year Bonds with a Par Value