Explanation:
The journal entries are shown below:
1. Cash A/c Dr $1,000,000
To Bonds payable A/c $1,000,000
(Being the bond is issued)
2. Interest expense A/c Dr $40,000
To Cash A/c $40,000
(Being the interest expense is recorded)
The computation is shown below:
= ($1,000,000 × 8% × 6 months ÷ 12 months)
= $40,000
3. Bond payable A/c Dr $1,000,000
Loss on redemption of bond A/c Dr $40,000
To Cash A/c $1,040,000
(Being the bond issue called is recorded)
