Premium Amortization

On the first day of the fiscal year, a company issues a $$5,000,000,7\%,$ five$-$year bond that pays semiannual interest of $$175,000($$$5,000,0007\%\frac{1}{2}),$ receiving cash of $$5,400,000.$

Journalize the first interest payment and the amortization of the related bond premium. If an amount box does not require an entry, leave it blank.

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Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight$-$line method of amortization provides equal amounts of amortization over the life of the bond.