On July 1, 2014, Flanagin Corporation issued $2,000,000, 10%, 10-year bonds at $2,271,813. This price resulted in

Question:

On July 1, 2014, Flanagin Corporation issued $2,000,000, 10%, 10-year bonds at $2,271,813. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

Instructions

(Round all computations to the nearest dollar.)

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

(b) Prepare an amortization table through December 31, 2015 (3 interest periods), for this bond issue.

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

(d) Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2015, assuming no accrual of interest on June 30.

(e) Prepare the journal entry to record the accrual of interest and the amortization of the premium 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...