On January 1, 2017, Benson Company purchases $120,000 , 6% bonds at a price of 93 and a maturity date of January 1, 2022. Benson Company plans to hold the bonds until their maturity date. Interest is paid semiannually, on January 1 and July 1. Benson Company has a calendar year and uses the straight-line amortization method for discounts and premiums. The adjusting entry on December 31, 2017 is:

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The bonds were purchased at a discount (93% of $120,000 = $111,600), so the discount is $8,400 ($120,000 - $111,600). The discount is amortized over 5 years (10 periods), resulting in $840 per period. The semiannual interest payment is $3,600 ($120,000 x 6% / 2). The adjusting entry on December 31, 2017, would account for the interest receivable and the amortization of the discount.

On January 1, 2017, Benson Company Purchases $120,000 , 6