1. Fast Tires issued $5,000,000 of five-year, 10% bonds on June 30, 20Y5, for $5,405,550. The bonds pay interest quarterly, beginning September 30, 20Y5. At the date of issuance, the market rate was 8%. Calculate the interest expense and bond amortization for the first fiscal year using the:

a.Straight-line method for amortization

b. Effective interest rate method for amortization

Use the information above to prepare the journal entries to record the issuance, first interest payment, and retirement of the bonds for Fast Tires. Assume the company uses the straight-line method for amortization.