Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $400 million on July 1, 2013, at a price of $380 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
a) Prepare the journal entry to record interest at the effective interest rate at December 31.
b) What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2013, if it uses the direct method?
c) Refer to the situation described above. What would be the amount related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2013, if it uses the indirect method?