Franklin issued $80,000 of 10-year, 8% bonds payable on January 1, 2016. Franklin pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line amortization method. The company can issue its bonds payable under various conditions.
Requirements
1. Journalize Franklin’s issuance of the bonds and first semiannual interest payment assuming the bonds were issued at face value. Explanations are not required.
2. Journalize Franklin’s issuance of the bonds and first semiannual interest payment assuming the bonds were issued at 94. Explanations are not required.
3. Journalize Franklin’s issuance of the bonds and first semiannual interest payment assuming the bonds were issued at 103. Explanations are not required.
4. Which bond price results in the most interest expense for Franklin? Explain in detail.