Presented below is the partial bond discount amortization schedule for Closet Corp., which uses the effective-interest method of amortization.

Instructions

(a) Prepare the journal entry to record the payment of interest and the discount amortization at the end of period 1.

(b) Explain why interest expense is greater than interest paid.

(c) Explain why interest expense will increase each period.

Transcribed Image Text:

Semiannual Interest Periods Issue date Interest to Be Paid Interest Expense to Be Recorded Discount Amortization Bond Unamortized Carrying Discount Value $62,311 $937,689 1 $45,000 $46,884 $1,884 60,427 939,573 2 45,000 46,979 1,979 58,448 941,552