On January 1, 2015, McDaniel Company issued a 5-year $1,000,000 bond with stated interest rate of 10%. Interests were payable semi-annually on July 1 and January 1. The market interest rate was 8%. McDaniel paid $10,000 issue costs, and amortizes any bond discount/premium using the effective interest method and bond issue costs using the straight-line method.
Required:
(1)Prepare journal entries on 1/1/2015 for McDaniel.
(2)Prepare journal entries on 12/31/2015 for McDaniel.
(3)After paying interests due on 1/1/2016, McDaniel recalled 100% of the bond at 102. Recall expenses totaled $2,000. Prepare journal entries for the interest payment and retirement of the bond for McDaniel.