Serenity, Inc. is authorized to issue 5%, 10-year bonds payable. On January 1, 2016, when the market interest rate is 8%, the company issues $700,000 of the bonds. The bonds pay interest semiannually.
Requirements
1. How much cash did the company receive upon issuance of the bonds payable?
2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments.
3. Journalize the issuance of the bonds on January 1, 2016, and payment of the first semiannual interest amount and amortization of the bond on June 30, 2016. Explanations are not required.