Complete the requirements of CP10-6, assuming Southwest Corporation uses effective-interest amortization.

CP10-6

Required:

1. Compute the issue price of the bonds in dollars (show computations).

2. Give the journal entry to record the issuance of the bonds.

3. Give the journal entries to record the payment of interest on December 31, 2012 and 2013.

4. How much interest expense would be reported on the income statements for 2012 and 2013? Show how the liability related to the bonds should be reported on the balance sheets at December 31, 2012 and 2013.