On 1 January 20X1, Omega Additives Limited issued \($500,000\) of eight-year, 7.5% debentures at a net price of \($485,635.\) Interest is payable annually, on the anniversary date of the bond. The company’s fiscal year ends on 31 December.

Required:

1. Determine the effective interest rate or effective yield on the bonds.

2. What proceeds would the bond have raised if it were issued to yield 6%?

3. Prepare an amortization schedule for the life of the bond, reflecting the original issuance price of \($485,635\).

4. Assume instead that the bond was issued on 1 March 20X1 and the yield was as in requirement 1. Calculate the proceeds on issuance of the bond and accrued interest.

5. Assuming that the bonds were issued as in requirement 4, calculate interest expense for 20X1 and determine the net balance of bonds payable as of 31 December 20X1.