On January 1, 2019, Hawthorne Corporation issued for $155,989, 5-year bonds with a face amount of $150,000 and a stated (or coupon) rate of 9%. The bonds pay interest annually and have an effective interest rate of 8%. Assume Hawthorne uses the effective interest rate method.
Required:
1. Prepare the entry to record the sale of the bonds.
2. Calculate the amount of the interest payments for the bonds.
3. Prepare the amortization table through 2020.
4. Prepare the journal entry for December 31, 2019, to record the payment of interest and the related interest expense.
5. Calculate the annual interest expense for 2019 and 2020.