Vanguard Corporation issued $1,000,000 of 5% bonds on February 1, 2023, due on January 31, 2030. The interest is to be paid twice a year on January 31 and July 31. The bonds were sold to yield 7% effective annual interest. Vanguard Corporation closes its books annually on December 31.

Present value of 1 for 14 periods at 2.5% 0.70773

Present value of 1 for 14 periods at 3.5% 0.61778

Present value of Ordinary annuity for 14 periods at 2.5% 11.69091

Present value of Ordinary annuity for 14 periods at 3.5% 10.92052

Instructions

Calculate the issuing price of the bonds (Show your work).

Prepare the journal entries for the first year (through January 2024), using the effective-interest method.

Compute the interest expense to be reported in the income statement for the year ended, December 31, 2023