Cole Corporation issued $400,000, 7%, 20-year bonds on January 1, 2014, for $360,727. This price resulted in

Question:

Cole Corporation issued $400,000, 7%, 20-year bonds on January 1, 2014, for

$360,727. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount.

Instructions Prepare the journal entries to record (round to the nearest dollar):

(a) The issuance of the bonds.

(b) The accrual of interest and the discount amortization on December 31, 2014.

(c) The payment of interest on January 1, 2015.

AppendixLO2

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