On January 1, 2014 Victory Falls Company issued $2,100,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8% and pay interest quarterly each year. When the bonds were sold, the market rate of interest was 6%. These bonds, when issued and sold, contained a call feature, which allowed the company to retire the bonds early, if they elected, for a one-time payment equal to 1% of the book value at the time of retirement.

Required:

A. Were the bonds issued at a discount, at a premium, or at par?

B. What was the issue price on January 1, 2014? Provide the journal entry to record the issuance of the bonds.

C. Construct two amortization schedule tables, one using the straight-line method and one using the effective-interest method, showing each quarterly payment

D. Provide the adjusting journal entries to record interest expense on June 30, 2014, and December 31, 2014 using the straight-line method.