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Will the interest expense increase or decrease over the year

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Sunshine Company issued a 10-year, 8%, $1,000,000 bond on Jan 1, 2009. The bond pays interest every December 31, with the principal to be paid at the end of 10 years. The annual market interest rate (effective interest rate) on Jan 1, 2009. was 5%.

Question 1: Were the bonds issued at par, a discount or a premium?

Question 2: Calculate the issue price.

Question 3: Record journal entry on the date of issuance.

Question 4: Will the interest expense increase or decrease over the years? Why?

Question 5: Calculate the interest expense on Dec 31, 2010 and record the journal entry.

Reference no: EM132934278

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