Houston Company Authorized a $1,000,000, 10-Year, 6% Bond Issue Dated

Essay

Houston Company authorized a $1,000,000, 10-year, 6% bond issue dated July 1, 2014, with annual interest to be paid each December 31. On July 1, 2014, the bonds were issued for $886,500. Houston Company has a December 31 year-end.
Required:
A. Prepare the journal entry to record the sale of the bonds.
B. Prepare the required journal entry on December 31, 2014 to record amortization (use the straight-line method.) No adjusting journal entries were made during the year.
C. Was the bond issued at par, at a discount, or at a premium?
D. Will interest expense be greater than or less than the cash payments for interest?