Mitchell Inc., issued 40, 6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30 and December 31, and were issued to yield 7%. The bonds mature December 31, 2022, and the company will use the straight-line interest method to amortize the bond discount or premium. Assume that the difference between the effective interest method and the straight-line interest method is not material.

Required

a. Determine the selling price of the bonds.

b. Prepare the straight-line interest amortization schedule for the full bond term.

c. Prepare journal entries on the following dates.

1. January 1, 2020, bond issuance.

2. June 30, 2020, interest payment.

3. December 31, 2020, interest payment.