Answer:
Cash                      2,214,007 debit
         bonds payable              2,000,000 credit
         premium on B.P                 214,007 credit
Explanation:
To know the proceeds for the bonds we will calculate the present value of the coupon payment and the present vlaue of the maturity at market rate:
The coupon payment will be an ordnary annuity
 
 
Coupon payment: 2,000,000 x 0.05 =  100,000
time: 10 years x 2 payment per year = 20
rate	8.5% annual rate: 0.085/2 = 0.0425 semiannual rate
 
 
PV	$1,329,436.5808 
Whilethe maturity the present value of a lump sum	
  
  
 Maturity  2,000,000.00
 time   10 years to maturity
  rate  0.085
  
  
 PV   884,570.83 
 
PV coupon payment	$1,329,436.5808 
PV maturity                   $884,570.8301 
Total	$2,214,007.4109 
facevalue  2,000,000
premium        214,007