On December 31, 1989, Nelsbore Corporation sold ($ 3) million of 10 -year, (9.5 %) bonds payable
Question:
On December 31, 1989, Nelsbore Corporation sold \(\$ 3\) million of 10 -year, \(9.5 \%\) bonds payable at a price that reflected a \(10 \%\) market rate of bond interest. The bonds pay interest on June 30 and December 31. Use the present value tables, Tables 10-1 and 10-2, pages 409 and 411 , as necessary, in calculating the amounts in your answers.
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1. Present a general journal entry to record the sale of the bonds.
2. Present general journal entries to record the first and second payments of in-
terest on June 30, 1990, and on December 31, 1990, assuming straight-line amortization of premium or discount.
3. Present general journal entries to record the first and second payments of interest on June 30, 1990, and on December 31, 1990, assuming the use of the interest method to amortize premium or discount.
4. Prepare a schedule like the one on page 451 that has columns for the beginning-of-period carrying amount, interest expense to be recorded, and interest expense as a percentage of carrying amount, assuming use of the (1) interest method, and (2) straight-line method. In completing the schedule, present the amounts for period 1 and period 2 .
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