Question: Answer the question according to the instructions given below: On July 1, 2020, ABC Corporation issued $2,000,000 of 8%, 10-year bonds. The market interest rate

Answer the question according to the instructions given below:

On July 1, 2020, ABC Corporation issued $2,000,000 of 8%, 10-year bonds. The market interest rate was 10% at the time of issuance of the bonds. ABC Corp. uses the effective-interest method of amortization. The bonds pay interest semi-annually on July 1 and January 1. ABC Corp. has a December 31 year-end.

Instructions:

(Round all computations to the nearest dollar.)

a) Calculate the issue price of the bonds.

b) Prepare the journal entry to record the issuance of the bonds on July 1, 2020.

c) Prepare the adjusting journal entry to record the accrual of interest on December 31, 2020.

d) Prepare the journal entry to record the payment of interest on January 1, 2021. Assume Max does not use reversing entries.

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