Question one: (11 marks) Patey Company issued 14% bonds on January 1, 2012, with a principal amount of $5,000,000, for $5,500,000 (the issue price). The market yield for bonds of similar risk and maturity was 11% The bonds mature December 31, 2016 (5 years). Interest is paid semiannually on June 30 and December 31. Required: 1) Prepare the journal entry to record the issue of bonds on January 1, 2012 2) Prepare journal entries to record interest payments for year 2012. 3) What is the amount(s) related to the bonds that Patey will report in its balance sheet at December 31, 2012? 4) What is the amount(s) related to the bonds that Patey will report in its income statement for the year ended December 31, 2012? Answers 1 & 2: Date Accounts Debit Amounts Credit Answer 3: Answer 4