Question
A company issued $4,000,000 of 8% bonds on October 1, 2014, due on October 1, 2019 for cash of $3,691,117. Interest is paid twice a
A company issued $4,000,000 of 8% bonds on October 1, 2014, due on October 1, 2019 for cash of $3,691,117. Interest is paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. The company uses the effective interest method to amortize bond discounts and premiums. The company closes its books annually on December 31.
Use the attached T-account template and prepare the following entries:
10/1/14 Issuance of bonds
10/31/14 Recognition of interest payable, interest expense and amortization of bond discount or premium
11/30/14 Recognition of interest payable, interest expense and amortization of bond discount or premium
12/31/14 Recognition of interest payable, expense and amortization of bond discount or premium
4/1/15 Payment of interest
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