(Analysis of Amortization Schedule and Interest Entries) The following amortization and interest schedule reflects the issuance of 10-year bonds by Terrel Brandon Corporation on January 1, 2000, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial 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, 2000.

(e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2000. (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 2007. Brandon Corporation does not use reversing entries.

Transcribed Image Text:

Amortization Schedule Amount Year 1/1/2000 Cash Interest Unamortized Book Value $5,651 $ 94,349 2000 $11,000 $11,322 5,329 94,671 2001 11,000 11,361 4,968 95,032 2002 11,000 11,404 4,564 95,436 2003 11,000 11,452 4,112 95,888 2004 11,000 11,507 3,605 96,395 2005 11,000 11,567 3,038 96,962 2006 11,000 11,635 2,403 97,597 2007 11,000 11,712 1,691 98,309 2008 11,000 11,797 894 99,106 2009 11,000 11,894 100,000