On January 2,2017,Carter Corporation issued $200,000,10%,10-year bonds for $160,000.The bonds pay interest each December 31.Carter Corporation uses the straight-line method to amortize premium or discount.On December 31,2017,Carter Corporation would record a:

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The bond is issued at a discount of $40,000 ($200,000 - $160,000) which needs to be amortized over the life of the bond. As the bond has a 10-year term, the discount will be amortized at $4,000 ($40,000/10) per year using the straight-line method. Therefore, on December 31, 2017, Carter Corporation would record a debit to Interest Expense for $24,000 ($20,000 for the bond's coupon and $4,000 for the amortization of discount) and a credit to Cash for $20,000 for the payment of interest. There is no need to credit Premium on Bonds Payable as the bond was issued at a discount, not a premium.

On January 2,2017,Carter Corporation Issued $200,000,10%,10-Year Bonds for $160,000