On March 1, 2014, Oaken Furniture Co. issued $700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in 10 years. Oaken Furniture Co. is a calendar-year corporation.
a) Determine the issue price of the bonds. Show your computations.
b) Prepare an amortization table through the first two interest periods using the effective-interest method.
c) Prepare the journal entries to record bond-related transactions as of the following dates:
1) March 1, 2014
2) August 31, 2014
3) December 31, 2014
4) February 28, 2015