Sisco Company issued $500,000, 6%, 10-year bonds for $425,000 with a market rate of 8%. The effective-interest method of amortization is to be used and interest is paid annually. The journal entry on the first interest payment date would include a:

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The effective-interest method of amortization allocates the discount over the life of the bonds. The first interest payment would include a credit to Discount on Bonds Payable of $4,000, which represents the portion of the discount that is being amortized for the year.

Sisco Company Issued $500,000, 6%, 10-Year Bonds for $425,000 with a Market