On January 1, 2021, Plains, Inc. issues $2,700,000 in 10-year bonds that pay 7%, while bonds of similar risk and maturity are paying 8%. They pay interest semi-annually on June 30^th and December 31^st. They use the effective interest method to calculate interest expense.

SHOW YOUR WORK. Include calculations, rates, and factors.

REQUIREMENT 1 (7 points):

Provide the number of compounding periods for the bonds___________________

Provide the market interest rate per compounding period___________________________

Provide the amount of cash paid for each semi-annual interest payment____________________

Provide the total cash received at issuance for the bonds_____________________

Was this bond issued at a discount or a premium?_____________________

REQUIREMENT 2 (3 points): Prepare the journal entry to record issuance of the bonds on January 1, 2021 by Plains, Inc.:

REQUIREMENT 3 (3 points): Prepare the journal entry to record the interest payment on June 30, 2021 by Plains, Inc.: