Summa Manufacturing Company issued $ 900,000 par value, 5%, five- year bonds dated January 1, 2016. The bonds pay interest semiannually each June 30 and December 31. Summa issued the bonds on April 30, 2016, when the market rate of interest was 6%. Bond issue costs were $ 59,000.
a. Determine the bond issue price including accrued interest on April 30, 2016.
b. Prepare an amortization table for the bond issue using the effective interest rate method.
c. Prepare the journal entries required on the date of issue and on the first two interest dates in 2016: June 30 and December 31.
d. The bonds are retired on June 30, 2018, for $ 891,000. Prepare the journal entry at retirement.