Recording Bond Entries and Reporting Bonds$$ Effective Interest Method, Straight$-$Line

Master Corp. issued $8\%,$ $$40,000$ bonds on February $1$ of Year $1.$ The bonds pay interest semiannually each July $31$ and January $31$ and were issued to yield $7\%.$ The bonds mature in ten years on January $31,$ and the company uses the effective interest method to amortize bond discounts or premiums, and that no reversing entries are made.

Required

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

$1.$ February $1$ of Year $1$Issuance of bonds.

$2.$ July $31$ of Year $1$Interest payment.

$3.$ December $31$ of Year $1$Interest accrual.

$4.$ January $31$ of Year $2$Interest payment.

b$.$ Indicate how the balance sheet as of December $31$ of Year $1,$ and the Year $1$ income statement, would reflect these transactions.

c$.$ What is the total cost of financing assuming that the bonds remain outstanding for the full term?

d$.$ What is the total cost of financing assuming that the bonds remain outstanding for the full term if instead the straight$-$line interest method was used to amortize the premium?

e$.$ If the company were to have instead amortized the premium using the straight$-$line interest method, would interest expense recognized be lower or higher in Year $1?$

f$.$ If the company were to have instead amortized the premium using the straight$-$line interest method, would total interest expense recognized for the ten$-$year period be higher or lower than when using the effective interest method?