Assume the following: a $500,000 bond with a 10% coupon rate payable annually each December 31 is issued at 107.987 on January 1, 2020 and matures in five years on January 1, 2025. The market rate (required return) of interest at the time of issue is 8%.

1. How much cash will the company receive on 1/1/2020 upon the issuance of the bonds in the primary market?
2. Show the journal entry upon issuance of the bonds on 1/1/2020.
3. Using Excel: Construct an amortization table for the premium using the effective interest method over the five year life (you may have a slight rounding difference at maturity so that your book value will not be equal to your face value. Thats fine)
4. Show the journal entry to record interest expense on 12/31/2020 using your amortization table.
5. Using your amortization table in c above, what is the bond value in the liability section of the 12/31/2020 balance sheet?
6. Show the annual journal entry to record interest expense using the straight line method to amortize the premium.
7. Record the journal entry on the maturity date of the bond, 1/1/2025.