On December 31, 2020, Sierra Corp. issues 4 percent, 10-year convertible bonds with a maturity value of $4,500,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 5 percent, and the issue price of the bonds is 92.2054. Sierra Corp. amortizes bond premium and discount by the effective-interest method. 

Required

1. Prepare an effective-interest method amortization table for the first four semiannual interest periods.

2. Journalize the following transactions:

a. Issuance of the bonds on December 31, 2020. Credit Convertible Bonds Payable.

b. Payment of interest on June 30, 2021.

c. Payment of interest on December 31, 2021.

d. Retirement of the bonds with a maturity value of $200,000 on July 2, 2022. Sierra Corp. purchases the bonds at 96.00 in the open market.

e. Conversion by the bondholders on July 2, 2022, of bonds with a maturity value of $400,000 into 5,000 Sierra Corp. common shares.

3. Prepare the balance sheet presentation of the bonds payable that are outstanding at December 31, 2022.