Worthington Company issued $1,000,000 face value , six-year, 10% bond on July 1, 2010, when the market rate of interest was 12%. Interest payments are due every July 1, and January 1. Worthington uses a calendar year-end.
1. Prepare the journal entry to record the issuance of the bonds on July 1, 2010.
2. Prepare the adjusting journal entry on December 31, 2010, to accrue interest expense.
3. Prepare the journal entry to record the interest payment on January 1, 2011.
4. Calculate the amount of cash that will be paid for the retirement of the bonds on the maturity date.