The company plans to issue 10-year bonds, as follows:

• Dated: December 31, 2020
• $7,000,000 face value of 6%

The bonds were finally issued on April 1, 2021 at par value plus accrued interest. Interest payments are made semi-annually on June 30 and December 31. Greenfield can call the bonds at any time at 102.

The organization is also involved in a lawsuit. The case is with the Environmental Protection Agency (EPA). The EPA sued the company for $2,000,000 in damages. The lawsuit claims that the organization illegally dumped harmful chemicals in an area that polluted the residents water supply. The lawsuit is not expected to be resolved for at least 2 years. Greenfields attorneys believe it is possible that the company could lose the case.

For this assignment, complete the following requirements:

Part 1

1. Prepare the journal entry to record issuance of the bonds by Greenfield Incorporated on April 1, 2021.
2. Prepare the journal entry to record the first semi-annual interest payment that Greenfield Incorporated needs to make on the bonds at June 30, Year 2021.
3. What is the amount of bond interest expense that appears in the organizations 2021 income statement relating to these bonds?
4. What is the amount of accrued bond interest expense that appears in the organizations 2021 balance sheet at December 31, 2021, with respect to these bonds?

Part 2

In a 4 page memo, summarize the organizations ethical duty on reporting loss contingencies in the financial statements. Discuss ethical problems that could exist with valuing the liability. What are the legal disclosure requirements for the company?