Recording Bond Entries and Preparing an Amortization Schedule$$Debt Issuance Costs

Mitchell Inc. issued $40$ of its $6\%,$ $$1,000$ bonds on January $1$ of Year $1.$ The bonds pay cash interest semiannually each July $1$ and December $31$ and were issued to yield $7\%.$ Debt issuance costs were $$800.$ The bonds mature in three years on December $31,$ and the company uses the effective interest method to amortize bond discounts and debt issuance costs.

Required

a$.$ Determine the selling price of the bonds, net of debt issuance costs.

b$.$ Prepare an amortization schedule for the first year of the bond term.

c$.$ Prepare journal entries on the following dates.

$1.$ January $1$ of Year $1,$ bond issuance.

$2.$ July $1$ of Year $1,$ interest payment.

$3.$ December $31$ of Year $1,$ interest payment.

Bond Selling Price

Amortization Schedule

Journal Entries

Note Round amount to the nearest whole dollar.

a$.$ Selling price of bonds

Answer $1$

$0$