Foreman Inc. issued $800,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semi-annually on July 1 and January 1. Foreman Inc. uses the effective interest method of amortization for any bond premium or discount. Assume an effective yield of 9.75%. (With a market rate of 9.75%, the issue price would be slightly higher. For simplicity, ignore this.)
Instructions
Prepare the journal entries to record the following (round to the nearest dollar):
(a) The issuance of the bonds
(b) The payment of interest and the related amortization on July 1, 2014
(c) The accrual of interest and the related amortization on December 31, 2014