Explanation:
The journal entries are shown below:
1. Cash A/c Dr $ 5,050,000
To Bonds payable A/c $5,000,000
To Premium on Bonds payable A/c $50,000
(Being bond is issued)
2. Interest Expense A/c Dr $3,97,500
Premium on bonds payable A/c $2,500 ($50,000 ÷ 20)
To Interest payable A/c $400,000 ($5,000,000 × 8%)
(Being the interest expense is recorded)
