Redstone Energy issued bonds below face value and amortises the discount using the straight-line method.
| Date | Event |
|---|
| January 1, 2026 | Issued $100,000 of 5-year, 6% bonds at 96 (i.e. for $96,000). Interest is paid annually on December 31. |
| December 31, 2026 | Paid the annual interest and amortised the discount. |
Required: Prepare the issuance entry and the December 31 interest entry. Annual cash interest is $6,000; the discount amortisation is $4,000 ÷ 5 = $800, so interest expense is $6,800.