Question

Erik Food SupplyCompany issued $100,000 of face amount of 4-year bonds on January1, 20X1. The bonds were issued at 98, and bear interest at a statedrate of 8% per annum, payable semiannually. The discount isamortized by the straight-line method.

(a)

Prepare the journal entry torecord the initial issuance on January, 20X1.

(b)

Prepare the journal entry thatErik would record on each interest date.

(c)

Prepare the journal entry thatErik would record at maturity of the bonds.

(d)

How much cash flowed “in” and”out” on this bond issue, and how does the difference compare tototal interest expense that was recognized?