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Exercise 4-2 On January 1, 2012, Fromer issued $3,000,000 of 12-year, 7 percent bonds. Interest is paid semi-annually on June 30 and December 31. The

Exercise 4-2 On January 1, 2012, Fromer issued $3,000,000 of 12-year, 7 percent bonds. Interest is paid semi-annually on June 30 and December 31. The issue price was $2,592,000. 1. Prepare the January 1, 2012, journal entry that records the bond issue.

2. Compute the following for each semi-annual period: a. Cash payment. b. Straight-line discount amortization. c. Interest expense.

3. Determine the total interest expense recognized over the life of the bonds.

4. Prepare the first two years of an amortization table (use the straight-line method).

Semiannual Period-End Unamortized Discount Carrying Value

[Create your amortization table here.]

5. For distinguished performance, prepare journal entries for the first two interest payments.

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