Bond Interest Payments and Interest Expense (Effective Interest Rate)}

On December 31, 2018, Huang Corporation issued for \(\$ 155,989\) five-year bonds with a face amount of \(\$ 150,000\) and a stated (or coupon) rate of \(9 \%\). The bonds pay interest annually and have an effective interest rate of \(8 \%\). Assume that Huang uses the effective interest rate method.

Required:

1. Prepare the entry to record the sale of the bonds.

2. Calculate the amount of the interest payments for the bonds.

3. Prepare the amortization table through 2020. (Note: Round to the nearest dollar.)

4. Prepare the journal entry for December 31,2019 , to record the payment of interest and the related interest expense 5. Calculate the annual interest expense for 2019 and 2020 .

OBJECTIVE 3 Exercise