Riley Company authorized a $1,000,000, 10-year, 6% bond issue dated July 1, 2009, with annual interest to be paid each December 31. On July 1, 2009, the bonds were issued for $886,500. Riley Company has a December 31 year-end.
A. Give the entry to record the sale of the bonds.
B. Give the required entry on December 31, 2009 to record amortization (use straight-line.)
C. Was the bond issued at par, at a discount, or at a premium?
D. Will interest expense be greater than or less than the cash payments for interest?