On January 1, 2011, Osborn Inc. sold 12% bonds having a maturity value of $800,000 for $860,651.79, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2011, and mature on January 1, 2016, with interest payable on January 1 of each year. The company follows IFRS and uses the effective interest method.
Instructions
(a) Prepare the journal entry at the date of issue.
(b) Prepare a schedule of interest expense and bond amortization for 2011 through 2014.
(c) Prepare the journal entry to record the interest payment and the amortization for 2011.
(d) Prepare the journal entry to record the interest payment and the amortization for 2013.
(e) Assume that the company follows private enterprise GAAP. Would there be any other accounting option available to the company with respect to the bond transactions?