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Bond Effective Interest Rate Method of amortization 1. ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at 103. They are 5 year
| Bond Effective Interest Rate Method of amortization | ||||||||||||
| 1. ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at 103. They are 5 year bonds. | ||||||||||||
| This sale occurred January 1, 2019. | ||||||||||||
| a. Provide an amortization schedule using the effective interest rate method for the entire life of the bond. | ||||||||||||
| b. Show the journal entry for the January sale. | ||||||||||||
| c. Show the journal entry for the first interest payment date. | ||||||||||||
| 2. ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at a market rate of 6%. They are 5 year bonds. | ||||||||||||
| This sale occurred January 1, 2019. | ||||||||||||
| a. Provide an amortization schedule using the effective interest rate method for the entire life of the bond. | ||||||||||||
| b. Show the journal entry for the January sale. | ||||||||||||
| c. Show the journal entry for the first interest payment date. | ||||||||||||
| NOTE: A good search term for finding examples is "effective interest rate method example" and "bond issuance price" | ||||||||||||
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College Accounting A Practical Approach
Authors: Jeffrey Slater
12th edition
978-0132772068, 133468100, 013277206X, 9780133468106, 978-0133133233
