Problem:
BondsRus, Inc issued 10 year semi-annual bonds on January 1, 2014 at 103 with a face amount of $400,000 and a coupon rate of 7%. They use the straight-line method to calculate interest expense.
Required:
Question 1: Prepare the journal entry for the bond issuance by BondsRus, Inc on January1, 2014.
Question 2: Provide the carrying amount on the balance sheet for BondsRus for this issuance on December 31, 2016.
Question 3: Provide the journal entry for the June 30, 2014 and December 31, 2014 interest payments.
Note: Provide support for your rationale.