The actual cash interest paid was only $5,000 -- the coupon multiplied by the bond's face value. However, interest expense also includes the $558.39 of amortized discount in the first six months.

At maturity, you debit the bonds payable account and credit the cash account for the face value of the bonds. Bond Issue Costs You must perform a second set of amortizations when you issue the bond.

Solve for the present value. You should find that the present value is $108,110.90. Thus, the bonds were sold at a premium of $8,110.90 ($108,110.90 in proceeds minus $100,000 in face value).