Lotti Corporation authorized a $2,000,000, 10-year, 8% bond issue dated July 1, 2014, with semi-interest to be paid each December 31 and June 30.On July 1, 2014, the bonds were issued for $2,294,400.
1) Were the bonds sold at par, at a discount, or at a premium?
2) Prepare the entry to record the issuance of the bonds.
3) Prepare the required entry on December 31, 2014, assuming straight-line amortization.
4) What is the carrying value or book value of the bonds on December 31, 2014?
5) "Issuing bonds at a discount is bad for the issuing corporation and issuing bonds at a premium is good for the issuing corporation."Discuss the validity of this statement.