Silk Company issued $500,000 of 7%, 10-year bonds on its interest date for $431,850 to yield an effective annual rate of 9%.The effective-interest method of amortization is to 1.The journal entry on the first interest payment date to record the payment of interest and amortization of discount will include a

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The effective-interest method of amortization involves calculating interest expense based on the carrying amount of the bond and the market interest rate. Since the bond was issued at a discount (issued for less than the face value), the interest expense recognized each period will be higher than the cash interest paid. The difference between the interest expense and the cash interest paid is used to amortize the discount on bonds payable, increasing the carrying amount of the bond over time until it reaches its face value at maturity. Option C is correct because it reflects the amortization of the discount, which is the difference between the interest expense based on the effective rate and the cash interest paid.

Silk Company Issued $500,000 of 7%, 10-Year Bonds on Its