On January 1, 2015, Bochini Corporation sold a $ 10 million, 8.25 percent bond issue. The bonds were dated January 1, 2015, had a yield of 8 percent, pay interest each December 31, and mature 10 years from the date of issue.
1. Prepare the journal entry to record the issuance of the bonds.
2. Prepare the journal entry to record the interest payment on December 31, 2015. Use effective-interest amortization.
3. Show how the bond interest expense and the bonds payable should be reported on the annual financial statements for 2015.