UMoveIT Corporation started business on January 1, 2020. On that date, UMoveIT Corp. issues $100,000 face value of 8% annual bonds that require interest payments on December 31 of each year and that are due in 20 years. The market rate of interest for bonds such as these on January 1, 2020 is 9%. UMoveIT accounts for these bonds using the effective interest method and prepares financial statements once each year on December 31. When it does its accounting, UMoveIT does not use a separate premium or discount account, but rather just includes any premium or discount in with the bond payable account. See class notes for further details on this bookkeeping.

REQUIRED:

A. What entry (or entries) does UMoveIT make related to these bonds during 2020 and 2021?

B. Assume that the market rate of interest for these bonds falls from 9% to 7% on January 1, 2022, and that UMoveIT uses fair value accounting. What entries does UMoveIT make related to these bonds during 2022? (UMoveITs credit quality does not change.)

C. At what amount would the bond liability appear on the balance sheets at the end of 2020, 2021, and 2022 (and also beginning of 2022). How will the income statement look for the 2020-2022 years?