Response to the following problem:
Leong Corporation was authorized to issue $500,000 face value bonds on January 1, 2015. The corporation issued $100,000 of face value bonds on that date. The bonds will mature on December 31, 2018. Interest is paid semi-annually on June 30 and December 31 each year. The bond interest rate per the terms of the indenture is 12% per year.
Required: Answer the questions for each of the following cases.
Case A: The bonds were issued at face value.
Case B: The bonds were issued for $112,000.
Case C: The bonds were issued for $88,000.
1. How much cash does Leong receive for the bonds?
2. How much annual interest must the corporation pay? On what amount does the corporation pay?
3. Prepare the journal entry to record the sale of the bonds.
4. Record the entries applicable to interest and straight-line amortization for June 30, 2015 and for December 31, 2015.