On January 1, 2011, Park Corporation sold a $600,000, 7.5 percent bond issue (8.5 percent market rate). The bonds were dated January 1, 2011, pay interest each June 30 and December 31, and mature in four years.
- Prepare the journal entry to record the issuance of the bonds.
- Prepare the journal entry to record the interest payment on June 30, 2011. Use effective-interest amortization.
How much interest expense would be reported on the income statement for 2011? Show how the liability related to the bonds should be reported on the June 30, 2011, balance sheet.