Response to the following problem:
McLaren Ford Sales issued $500,000 of 10-year, 8% bonds payable at maturity (par) value on May 1, 20X5. The bonds pay interest each April 30 and October 31, and the company ends its accounting year on December 31.
Required:
1. Fill in the blanks to complete these statements:
a. McLaren's bonds are priced at (express the price as a percentage) ______.
b. When McLaren issued its bonds, the market interest rate was ______%.
c. The amount of bond discount or premium for McLaren to account for is $ ______ because the bonds were issued at ______.
2. Journalize for McLaren
a. Issuance of the bonds payable on May 1, 20X5.
b. Payment of interest on October 31, 20X5.
c. Accrual of interest at December 31, 20X5.
d. Payment of interest on April 30, 20X6.
Explanations are not required.
3. Show what McLaren will report on its income statement for 20X5 and on its balance sheet at December 31, 20X5.