Worthington Company issued 1,000,000 face value, 10% bonds on July 1 2012, when the market rate of interest was 12%. Interest payments are due every July 1 and January 1. Worthington uses a calendar year-end.

To calculate the interest expense and interest payment schedule for the bonds issued by Worthington Company, we need to consider the following information:

1. Face Value: The face value of the bonds is $1,000,000.
2. Coupon Rate: The coupon rate is 10%, which means the bonds will pay interest at a rate of 10% of the face value.
3. Market Rate: The market rate of interest at the time of issuance was 12%.

First, we need to calculate the interest expense. The interest expense is the amount of interest that the company will have to pay to bondholders each period. It is calculated by multiplying the market rate of interest by the carrying value of the bonds.

To calculate the carrying value of the bonds, we need to determine the discount or premium on the bond. Since the coupon rate is lower than the market rate, the bond is sold at a discount. The discount on the bond is the difference between the face value and the present value of the bond's future cash flows.

Next, we need to determine the periodic interest payment. The interest payment is the amount of interest that the company will pay to bondholders each period. It is calculated by multiplying the coupon rate by the face value of the bond.

To calculate the periodic interest payment, we need to determine whether the bond pays interest semi-annually or annually. In this case, the bond pays interest semi-annually since interest payments are due every July 1 and January 1. So, we divide the annual coupon rate by 2.

Now, let's calculate the interest expense and interest payment schedule for the bonds.

1. Calculate the carrying value of the bonds:
- Determine the present value of the bond's future cash flows using the market rate of interest and the face value.
- Subtract the present value from the face value to get the carrying value.

2. Calculate the interest expense:
- Multiply the carrying value of the bonds by the market rate of interest.

3. Calculate the periodic interest payment:
- Multiply the face value of the bonds by half of the annual coupon rate.

Lastly, we can create a schedule to show the interest expense and interest payment for each period. Since we are given that interest payments are due every July 1 and January 1, we can allocate the interest expense and payments accordingly.

Please note that this is a general explanation of how to calculate the interest expense and interest payment schedule for bonds. For more accurate calculations and specific examples, it is recommended to refer to the financial statements or consult with a financial professional.