Recording Bond Entries and Preparing an Amortization Schedule Effective Interest Method, Discount, Interest Accrual

Mitchell Inc. issued 240 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each July 1 and January 1 and were issued to yield 7%. The bonds mature in three years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums.

Required

a. Determine the selling price of the bonds. 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 accrual. 4. January 1 of Year 2, interest payment. (No reversing entries made.)