Mitchell Inc. issued 92,6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1, and December 31, and were issued to yield 7%. Debt issuance costs were $1,840. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts and debt issuance costs. Required a. Determine the selling price of the bonds, net of debt issuance costs. Round to the nearest dollar. b. Prepare an amortization schedule for the full bond term. c. Prepare journal entries on the following dates. 1. January 1, 2020, bond issuance. 2. July 1, 2020, interest payment. 3. December 31, 2020, interest payment. For the following separate bond issues, assume that the bonds are sold on January 1, 2020, interest is paid semiannually on July 1 and December 31, and the bond term is 5 years. Complete the following schedule by measuring the bond selling price on January 1, 2020, and interest expense and interest paid for 2020. Note: Round your answers to the nearest whole dollar. Interest interest Expense 2020 Paid 2020 $ 0 $ Face Value Stated Market Amortization Bond Selling Case of Bonds Rate Rate Method Price $30,000 5% 6% Effective interest $ 0 120,000 4% 5% Effective interest 0 390,000 5% Straight-line 1,500,000 0% 7% Straight-line 240,000 796 6% Effective interest 300,000 6% 8% Straight-line 496 Mitchell Inc. issued 92,6%, $1,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1, and December 31, and were issued to yield 7%. Debt issuance costs were $1,840. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts and debt issuance costs. Required a. Determine the selling price of the bonds, net of debt issuance costs. Round to the nearest dollar. b. Prepare an amortization schedule for the full bond term. c. Prepare journal entries on the following dates. 1. January 1, 2020, bond issuance. 2. July 1, 2020, interest payment. 3. December 31, 2020, interest payment. For the following separate bond issues, assume that the bonds are sold on January 1, 2020, interest is paid semiannually on July 1 and December 31, and the bond term is 5 years. Complete the following schedule by measuring the bond selling price on January 1, 2020, and interest expense and interest paid for 2020. Note: Round your answers to the nearest whole dollar. Interest interest Expense 2020 Paid 2020 $ 0 $ Face Value Stated Market Amortization Bond Selling Case of Bonds Rate Rate Method Price $30,000 5% 6% Effective interest $ 0 120,000 4% 5% Effective interest 0 390,000 5% Straight-line 1,500,000 0% 7% Straight-line 240,000 796 6% Effective interest 300,000 6% 8% Straight-line 496
