On January 1, 2013, Kelly Corporation acquired bonds with a face value of $500,000 for $483,841.79, a

Question:

On January 1, 2013, Kelly Corporation acquired bonds with a face value of $500,000 for $483,841.79, a price that yields a 10% effective annual interest rate. The bonds carry a 9% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2016, and are being held to maturity.

Required:

Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the:

1. Straight-line method of amortization

2. Effective interest method of amortization

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...