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.)

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