Alexi Co. issued $2.50 million face amount of 5%, 10-year bonds on June 1, 2016. The bonds pay interest on an annual basis on May 31 each year.

a. Independent of your answer to part a, assume that the proceeds were $2,139,000. Use the horizontal model to show the effect of issuing the bonds.

b. Independent of your answer to part a, assume that the proceeds were $2,139,000. Record the journal entry to show the effect of issuing the bonds.

c. Calculate the interest expense that Alexi Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2016, assuming that the discount of $361,000 is amortized on a straight-line basis.

Accrued interest payableDiscount amortizationInterest expense for 4 months$

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