Wilburn Corporation issued $1 million of 13.5% bonds for $985,017.68. The bonds are dated and issued October 1, 2013, are due September 30, 2017 and pay semi-annually on March 31 and September 30. Assume an effective yield rate of 14%.

1. Prepare a bond interest expense and discount amortization schedule using straight-line method and effective interest method.

2. Prepare adjusting entries for the end of the fiscal year December 31, 2013, using the: straight-line and effective interest methods.

3. If income before interest and income taxes of 30% in 2014 is $500,000, compute net income under each alternative.

4. Assume the company retired the bonds on June 30, 2014, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: straight-line and effective interest methods.

5. Compute the company's times interest earned (pretax operating income divided by interest expense) for 2014 under each alternative.