Lee Consulting Corporation is considering raising capital for a planned business expansion to a new market. Lee believes the company will need $500,000 and plans to raise the capital by issuing 6 percent, 10-year bonds on April 1, 2017. The bonds pay interest semi-annually on April 1 and October 1. On April 1, 2017, the market rate of interest required by similar bonds by investors is 8 percent, causing the bonds to sell for $431,850.
Required
1. Were the Lee Consulting Corporation bonds issued at par, a premium, or a discount?
2. Record the cash received on the bond issue date.
3. Journalize the first interest payment on October 1, 2017, and amortize the premium or discount using the effective-interest method.
4. Journalize the entry required, if any, on December 31, 2017, related to the bonds.