Response to the following problem:
Sandia, Inc., issued $100,000 of 10-year, 6% bonds payable on January 1, 20X6. Sandia pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line method. The company can issue its bonds payable under various conditions:
a. Issuance at par (maturity) value
b. Issuance at a price of 95
c. Issuance at a price of 105
Required:
1. Journalize Sandia's issuance of the bonds and first semiannual interest payment for each situation. Explanations are not required.
2. Which method results in the most interest expense for Sandia? Explain in detail.