Problem 2 On January 1, 2020, ABC issues 12%, 15-year bonds with a face value of $100,000. Interest is payable semi-annually on June 30 and December 31, and the bond will be repaid on December 31, 2034. The market rate of interest on the date of issue is 8%, compounded semi-annually. 1. What is the issue price of the bonds on January 1, 2020? What is the journal entry to record the issuance? 2. What is the interest expense for the year ended December 31, 2031? What is the value at which the bond liability will be reported on ABC's balance sheet as of December 31, 2031? (Hint: 1) There are two interest periods within the year ended December 31, 2031 (1/1/31-6/30/31 and 7/1/31-12/31/31); 2) Interest expense for the interest period = Book value of the bonds at the beginning of the interest period * market rate on the date of issue; 3) Book value of bonds at any point in time is the PV of the remaining payments. Also see "Bond Practice Problem" in "Practice Problems" folder, if you need help)