Worthington Company issued $1,000,000 face value, six-year, 10% bonds on July 1, 2012, when the market rate of interest was 12%. Interest payments are due every July 1 and January 1. Worthington uses a calendar year-end.
Required:
- Prepare the journal entry to record the issuance of the bonds on July 1, 2012.
- Prepare the adjusting journal entry on December 31, 2012, to accrue interest expense.
- Prepare the journal entry to record the interest payment on January 1, 2013.
- Calculate the amount of cash that will be paid for the retirement of the bonds on the maturity date.