Problem
A. On January 1, 2019, MaryLee Company issued $10 million, 4%, ten-year bonds payable for $8.5 million. The market rate at the date of issue is 6%. Interest is payable semi-annually on June 30 and December 31 of each year. MaryLee uses the effective interest method of amortization.
B. Prepare the journal entry to record the issuance of the bonds on January 1, 2019.
C. Prepare the journal entry to record the first interest payment and interest expense on June 30, 2019.
D. Assume new management takes over on January 1, 2020 and, because of low interest rates, they decide to enter the market and retire the existing bonds at a price of 83 (or $830 for each $1000 face bond). Prepare the journal entry to record the retirement of the bonds on January 1, 2020.