On July 1, 2015, Pat Inc. issued $1,000,000 in 5%, 5-year bonds when the market rate of interest is 4%. Interest is paid semiannually. Interest is paid semiannually on December 31 and June 30. The company has a fiscal year ending December 31.

A. Required: Prepare the journal entry to record the issuance of Pat Inc. bonds on July 1, 2015. (Show all calculations)

B. Required: Prepare the journal entry to record the payment of interest expense on December 31, 2015, assuming the company uses the effective interest method.