McNeil

Corporation issued

$900,000

of

12%,

10-year

bonds payable on January 1,

2019.

The market interest rate at the date of issuance was

10%,

and the bonds pay interest semiannually (on June 30 and December 31).

McNeil

Corporation's year-end is June 30.

McNeil

prepared an effective-interest amortization table for the bonds through the first three interest payments as follows:

Reference

Semiannual Interest Date	Interest Payment	Interest Expense	Premium Amortization	Premium Account Balance	Bond Carrying Amount
Jan 1, 2019				112,160	1,012,160
Jun 30, 2019	54,000	50,608	3,392	108,768	1,008,768
Dec 31, 2019	54,000	50,438	3,562	105,206	1,005,206
Jun 30, 2020	54,000	50,260	3,740	101,466	1,001,466

Requirements

Use the amortization table for

McNeil

Corporation's bonds to answer the following questions:

1.	How much cash did McNeil Corporation borrow on January 1, 2019? How much cash will McNeil Corporation pay back at maturity?
2.	How much cash interest will McNeil Corporation pay each six months?
3.	How much interest expense will McNeil Corporation report on June 30, 2019, and on December 31, 2019? Does the amount of interest expense increase or decrease each period? Why?