Response to the following problem:
On January 1, 2016, Bishop Company issued 10% bonds dated January 1, 2016 with a face amount of $1,000,000. The bonds mature in 2020 (5 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2016.
2. Prepare the journal entry to record the bond issuance by Bishop on January 1,2016.
3. Prepare the journal entry to record interest on June 30, 2016, using the straight line method.
4. Prepare the journal entry to record interest on December 31, 2016, using the straight line method.