Western Inc. issues $800,000 of 5-year, 6% bonds on January 1, 2021. The bonds pay interest annually.

Instructions

a. Calculate the issue price of the bonds using a market rate of 5% and record the bond issue.

b. Prepare an effective-interest amortization table for the bonds.

c. Prepare the journal entries to record the first three interest payments. Ignore any year-end accruals of interest.

d. Assuming Western has an October 31 year end, prepare the adjusting entry for interest on October 31, 2021.