Milky Way Corp. is building a new music arena at a cost of $5,600,000. It received a down payment of $600,000 from local businesses to support the project, and now needs to borrow $5,000,000 to complete the project.

It therefore decides to issue $5,000,000 of 8%, 20-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 10%.

Instructions

(a) Calculate the issue price of the bond

(b) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs of $50,000 incurred on January 1, 2019.

(c) Prepare a bond amortization schedule up to and including January 1, 2023, using the effective-interest method.

(d) Prepare the journal entries for 2019 and 2020. Bond issues costs are amortized on a straight-line basis.

(e) Prepare the Liability section (both current and non-current) of the balance sheet at 12/31/20.

Round all amounts to the nearest dollar