On the first day of the fiscal year, a company issues a $970,000, 9%, 5-year bond that pays semiannual interest of $43,650 ($970,000 x 9% × 1/2), receiving cash of $884,171. Journalize the entry for the issuance of the bonds.
Since the bonds were sold at a lower price than par value, they were sold at a discount. That discount on bonds payable = total face value - cash received when issuing the bonds = $970,000 - $884,171 = $85,829
