On January 1, 2021, $1,200,000, 5-year, bonds with a stated rate of 10% payable annually were issued for cash of $1,295,844 when the market rate of interest was 8%.

a. Were these bonds issued at a discount or at a premium? Why?

b. Prepare the journal entry to record the issuance (sale) of the bonds (assuming the company uses Discount and Premium accounts).

c. Complete the following interest schedule (assuming effective-interest amortization).

d. Prepare the journal entry to record the first payment of interest on December 31, 2021 (assuming the company uses Discount and

Cash Owed for Interest None Interest Expense None Amortization of Bond Discount (or Premium) None Bonds Payable Book Value Date 1/1/2021 12/31/2021 12/31/2022