Answer all three parts using the dropdown menus:

On January 1, 2021, Star Software issues $400,000 of 10 year, 6% bonds. Interest is paid semi-annually on June 30 and December 31. Star receives proceeds of $431,000 (the market rate for the bonds was 5%).

(a) what is the amount of the liability that will be recorded on the date the bonds are issued (Jan 1, 2021)? [ Select ] ["$12,000", "$400,000", "$412,000", "$431,000"]

(b) what is the decrease in cash that will occur when interest is paid on June 30, 2021? [ Select ] ["$10,000", "$10,775", "$12,000", "$12,935"]

(c) what is the amount of interest expense (and the decrease in retained earnings) that will occur on June 30, 2021? [ Select ] ["$10,000", "$10,775", "$12,000", "$12,935"]