E10-14 (Algo) (Chapter Supplement) Recording and Reporting a Bond Issued at a Premium (without Premium Account) LO10-5

Park Corporation is planning to issue bonds with a face value of $2,017,000 and a coupon rate of 10 percent. The bonds mature in 5 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and does not use a premium account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1)

Note: Use appropriate factor(s) from the tables provided.

Required:

1. and 2. Prepare the journal entry to record the issuance of the bonds and the interest payment on June 30 of this year.

3. What bonds payable amount will Park report on its June 30 balance sheet?

Journal entry worksheet

• Record the issuance of the bonds
• Record the payment of interest on June 30 using the effective-interest amortization method.