Commonwealth Company issued bonds with the following provisions:

Maturity value: $300,000

Interest: 11 percent per annum payable annually each December 31

Terms: Bonds dated January 1, 2011, due five years from that date

The annual accounting period ends December 31. The bonds were sold on January 1, 2011, at a 10 percent market rate.

Required:

1. Compute the issue (sale) price of the bonds (show computations).

2. Give the journal entry to record the issuance of the bonds.

3. Give the journal entries at the following date (use straight-line amortization): December 31, 2011.

4. How much interest expense would be reported on the income statement for 2011? Show how the liability related to the bonds should be reported on the December 31, 2011, balance sheet.