On May 1, 2011, Fellenger Enterprises issues bonds dated January 1, 2011, that have a $1,700,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par plus four months’ accrued interest.
1. How much accrued interest do the bond purchasers pay Fellenger on May 1, 2011?
2. Prepare Fellenger’s journal entries to record
(a) The issuance of bonds on May 1, 2011;
(b) The first interest payment on June 30, 2011; and
(c) The second interest payment on December 31, 2011.