Obsidian Mining, Inc. issued a series of 5.2%, $200,000 bonds on April 1, 2020. The bonds will pay interest semi-annually on September 30 and March 31 and mature in 10 years. At the time of issuance, the market rate of interest was 4.8%.

Instructions

1. Record the journal entry for the issuance of the bonds on April 1, 2020.
2. Record the journal entry for the first interest payment on September 30, 2020.
3. Record the year-end accrual for interest on December 31, 2020.
4. What is the total cash paid for interest by Obsidian over the life of the bonds?
5. What is the total effective interest expense recognized by Obsidian over the life of the bonds?
6. Assume that Obsidian retires the bonds at 101 immediately after the 8th interest payment, when the carrying value of the bonds is $204,128. Record the journal entry to retire the bonds.