Bonds Issued at a Discount (Straight Line)

On December 31, 2017, Mayor Company issued 40,000 five-year bonds with a \(\$ 1,000\) par value each. The market values the bonds at \(\$ 30,000\) less than the face value of the bonds. The stated rate of interest is \(6 \%\), and interest is paid annually on December 31 .

Required:

Prepare the necessary journal entry on December 31,2018 , assuming the straight-line method is followed.

OBJECTIVE (4) Brief Exercise