Suffolk Corporation issued $100,000 of 20-year,6 percent bonds at 98 on one of its semi-annual interest dates.The straight-line method of amortization is to be used.The entry to record the bond interest expense on the next interest payment date is:

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Using the straight-line method of amortization, the bond discount of $2,000 ($100,000 - $98,000) will be amortized evenly over the 20-year life of the bond, resulting in an annual amortization expense of $100 ($2,000/20). Therefore, the journal entry to record the bond interest expense on the next interest payment date (assuming a semi-annual payment schedule) would be:

Interest Expense (6/2 x $100,000 x 6%) 3,000 
Discount on Bonds Payable (1/2 x $100) 50 
Cash 2,950

The Discount on Bonds Payable account is credited because it represents a reduction in the carrying value of the bonds, which must be accounted for as an additional interest expense over the life of the bond.