On January 1, 2020, Flanagin Corporation issued $5,000,000 face value, 8%, 10-year-bonds at $4,376,892. The price resulted in a 10% effective-interest rate on the bonds. Flanagin uses the effective interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1.

Prepare the journal entry to record the following transactions:

The issuance of bonds on January 1, 2020. (2 marks)

Accrual of interest and amortization of the discount on December 31, 2020. (1.5 marks)

The payment of interest on January 1, 2021. (1 mark)

Accrual of interest and amortization of the premium on December 31, 2021. (1.5 marks)

Show the non-current liabilities section on the statement of financial position for the bond liability at December 31, 2021. (1 mark)

Compute the total cost of borrowing over the life of the bond. (1 mark)

How much would be bond interest expense on December 31, 2021 if the straight line method of amortization were used? (1 mark)