On July 1, 2016, Plaza Ventures, Inc. issued $3,000,000 of 7% bonds, due in 10 years, with interest payable semiannually on July 1 and January 1. At the time of issue, the market rate for such bonds is 5%.

A. Prepare the journal entry to record issuance of these bonds.

B. Assuming Plaza uses the effective interest method of amortization, prepare the journal entries to

a. Accrue interest on December 31, 2016

b. Pay interest on January 1, 2017

c. Pay interest on July 1, 2017

d. Accrue interest on December 31, 2017

e. Pay interest on January 1, 2018

C. What is the total amount of interest expense that Plaza should report on its 2016 and 2017 income statements?

D. What is the total amount of cash that Plaza will pay bondholders in 2016? In 2017?

E. How should these bonds be presented on Plazas 2016 and 2017 balance sheets?

F. Assuming Plaza instead uses the straight line method of amortization, what amount of interest expense will be reported in 2016? 2017?

G. Assume Plaza uses the straight line method of amortization and recalls all of the bonds at 102 on January 2, 2017. Prepare the journal entry to record this transaction.

Caution: work that is not clearly labeled (e.g. (a), (b)) will not be graded. Work without supporting computations will receive no credit.