On March 1, 2014, Oaken furniture Co. issued $700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in ten years. Oaken Furniture Co. is a calendar-year corporation.
1. Determine the issue price of the bonds. Show your computations.
2. Prepare an amortization table through the first two interest periods using the effective-interest method.
3. Prepare the journal entries to record bond-related transactions as of the following dates:
A. March 1, 2014
B. August 31, 2014
C. December 31, 2014
D. February 28, 2015