On January 1, 2014, BakBone Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest semi-annually on June 30 and December 31. The bonds were sold to investors at their par value.
a. How much interest will BakBone pay to the holders of these bonds every six months?
b. Show the journal entries that BakBone would make to record: (1) the issuance of the bonds on
January 1, 2014; (2) the first interest payment on June 30, 2014; and (3) the second interest payment on December 31, 2014.