3. Maggio Corporation issued $500,000, 10% bonds on October 1, 2015, due on October 1, 2020. Interest is to be paid semi-annually on April 1 and October 1. The bonds were sold to yield 12% effective annual interest. Maggio Corporation has a calendar year end.

Instructions

(a) Complete the following amortization schedule for the dates indicated. Round all answers to the nearest dollar. Use effective interest method. (8 marks)

Credit Cash

Debit Interest Expense

Credit Bond Discount (Discount)

Carrying Amount of Bonds

Oct 1/15

$ 463,200

Apr 1/16

Oct 1/16

(b) Prepared the adjusting entry required for these bonds at December 31, 2016 (2 marks)

(c) Calculate the interest expense to be reported in the income statement for the year ended December 31, 2016 (2 marks)