Holmes Corporation sold $2,200,000, 8%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Holmes Corporation uses the straight-line method to amortize bond premium or discount.

Instructions

(a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2014, assuming that the bonds sold at 102.

(b) Prepare journal entries as in part

(a) assuming that the bonds sold at 98.

(c) Show the balance sheet presentation for the bond issue at December 31, 2014, using

(1) the 102 selling price, and then (2) the 98 selling price.

AppendixLO2