Recording Bond Entries and Preparing an Amortization ScheduleDebt Issuance Costs

Mitchell Inc. issued 120 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 $2,400. 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.

Note: Round amounts in schedule to the nearest whole dollar. Note: Do not round the effective interest rate used in the Schedule. Note: Do not use negative signs. Note: Round your answers to the nearest whole dollar