On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price

Question:

On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1.

Instructions

(Round all computations to the nearest dollar.)

(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2014.

(b) Prepare an amortization table through December 31, 2016 (three interest periods) for this bond issue.

(c) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2014.

d) Prepare the journal entry to record the payment of interest on January 1, 2015.

(e) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2015.

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...