Pompeii Company sold $1,500,000, 12%, 10-year bonds on July 1, 2001. The bonds were dated July 1, 2001, and pay interest on July 1 and January 1. Pompeii Company uses the straight-line method to amortize bond premium or discount. Assume no interest is accrued on June 30.

Instructions

(a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2001, assuming that the bonds sold at 103.

(b) Prepare journal entries as in part

(a) assuming that the bonds sold at 95.

(c) Show the balance sheet presentation for the bond issue at December 31, 2001, using

(1) the 103 selling price, and then (2) the 95 selling price.