Lorance Corporation issued $800,000, 9%, 10-year bonds on January 1, 2014, for $750,150. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Lorance uses the effective-interest method and to amortize bond premium or discount.
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 discount amortization on July 1, 2014, assuming that interest was not accrued on June 30.
(c) The actual of interest and the discount amortization on December 31, 2014.