Castlegar Systems Inc. had the following information available on bonds payable outstanding at December 31, 2020, its year-end:

• $5,000,000—Bonds Payable, 9 percent, interest paid on April 2 and October 2. The bonds had been issued on April 2, 2020, for $5,131,053 when the market rate of interest was 8 percent, and are due April 2, 2023. The following transactions took place after December 31, 2020:

2021

Jan. 2 Castelgar Systems Inc. signed a lease to rent a warehouse for expansion of its operations. The lease is five years with an option to renew and calls for annual payments of $50,000 per year payable on January 2. Castelgar Systems gave a cheque for the first year upon signing the contract.

2 Castelgar Systems Inc. signed a lease for equipment. The lease is for

10 years with payments of $40,000 per year payable on January 2 (the first year’s payment was made at the signing). At the end of the lease the equipment will become the property of Castelgar Systems. The future payments on the lease have a present value (at 10 percent) of $270,361. The equipment has a 10-year useful life and 10 percent residual value.

Apr. 2 Paid the interest on the bonds payable and amortized the premium using the effective-interest method. Assume half of the interest expense, amortization of the bond premium, and interest payable had been accrued properly on December 31, 2020.

Oct. 2 Paid the interest on the bonds payable and amortized the premium using the effective-interest method.

Dec. 31 Recorded any adjustments required at the end of the year for the bonds payable and the lease(s).

2022

Jan. 2 Made the annual payments on the leases.

Apr. 2 Paid the interest on the bonds payable and amortized the premium using the effective-interest method.

Required

1. For the bonds issued on April 2, 2020, prepare an amortization schedule for the three-year life of the bonds. Round all amounts to the nearest whole dollar.

2. Record the general journal entries for the 2021 and 2022 transactions.

3. Show the liabilities section of the balance sheet on December 31, 2022.