Final answer:
The issuance of Wefald Company bonds at discount and the subsequent interest payment involve specific journal entries to record the transaction and the straight-line amortization of the discount.
Step-by-step explanation:
When Wefald Company sold its bonds for $578,000, despite having a face value of $615,000, the difference of $37,000 represents a discount on the bonds. The sale of the bonds on January 1 would be recorded by debiting cash for $578,000, debiting Bond Discount for $37,000, and crediting Bonds Payable for $615,000. For the interest payment on June 30 using the straight-line amortization method,
the interest expense is calculated based on the stated interest rate, which is 9% of the $615,000 face amount, divided by two for the semiannual payment, resulting in a payment of $27,675. However, the discount on the bonds must also be amortized over the life of the bond. The amortization for each period is the total discount divided by the number of periods, which adds back a portion of the discount to interest expense. The journal entry to record the bond interest payment includes a debit to Interest Expense and Bond Discount for the amortized amount and a credit to Cash for the actual cash interest paid.