The following amortization and interest schedule refl ects the issuance of 10-year bonds by Capulet Corporation on January 1, 2014, and the subsequent interest payments and charges. The company?s year-end is December 31, and fi nancial statements are prepared once yearly.

Instructions

a. Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.

b. Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used.

c. Determine the stated interest rate and the effective-interest rate.

d. On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2014.

e. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2014. (Interest is paid January 1.)

f. On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2021. Capulet Corporation does not use reversing entries.

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Amortization Schedule Carrying Value Amount Cash Unamortized Year Interest $ 94,349 1/1/2014 $5,651 5,329 2014 $11,000 $11,322 11,361 94,671 95,032 2015 11,000 11,000 4,968 4,564 2016 11,404 95,436 2017 11,000 11,000 11,000 11,452 11,507 4,112 3,605 95,888 96,395 2018 2019 11,567 3,038 96,962 2,403 1,691 2020 11,000 11,000 11,635 11,712 97,597 98,309 2021 2022 11,000 11,797 894 99,106 2023 11,000 11,894 100,000