Pretzelmania, inc., issues 7%, 15-year bonds with a face amount of $70,000 for $63,948 on january 1, 2021. the market interest rate for bonds of similar risk and maturity is 8%. interest is paid semiannually on june 30 and december 31.record the bond issue and first interest payment on june 30, 2021. (if no entry is required for a particular transaction/event, select "no journal entry required" in the first account field. round your intermediate computations and final answers to the nearest whole dollar amount.)

The journal entry will be

Debit Cash A/c $63,948

Debit Discount on bonds payable $6,052

Credit Bonds payable $70,000

(Being the issuance of the bond is recorded)

Debit Interest expense  $2,558

Debit Discount on bonds payable $108

Credit Cash A/c $2,450

(Being the first interest payment is recorded

Based on the information given, it should be noted that the interest expense is calculated as:

= ($63,948 × 8% × 6 months) / 12

= $2,558

For the cash account, it's calculated as:

= ($70,000 × 7% × 6 months) / 12

= $2,450

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1. Cash A/c Dr $63,948

Discount on bonds payable A/c $6,052

     To Bonds payable A/c $70,000

(Being the issuance of the bond is recorded)

2. Interest expense A/c Dr  $2,558

          To Discount on bonds payable A/c $108

          To Cash A/c $2,450

(Being the first interest payment is recorded)

Explanation:

The journal entries are shown below:

1. Cash A/c Dr $63,948

Discount on bonds payable A/c $6,052

     To Bonds payable A/c $70,000

(Being the issuance of the bond is recorded)

2. Interest expense A/c Dr  $2,558

          To Discount on bonds payable A/c $108

          To Cash A/c $2,450

(Being the first interest payment is recorded)

The computation is shown below:

For interest expense

= $63,948 × 8% × 6 months ÷ 12 month

= $2,558

For cash A/c

= $70,000 × 7% × 6 months ÷ 12 month

= $2,450