Question

Luther Company borrowed money by issuing $2,500,000 of 4​% bonds payable at 101.8 on July​ 1,...

Luther Company borrowed money by issuing $2,500,000 of 4​% bonds payable at 101.8 on July​ 1,
2018. The bonds are​ five-year bonds and pay interest each January 1 and July 1.

1. How much cash did Luther receive when it issued the bonds​ payable? Journalize this transaction.

2. How much must Luther pay back at​ maturity? When is the maturity​ date?

3. How much cash interest will Luther pay each six​ months?

4. How much interest expense will Luther report each six​ months? Use the​ straight-line amortization method. Journalize the entries for the accrual of interest and the amortization of premium on December​ 31, 2018​, and payment of interest on January​ 1, 2019.

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