Effective Interest Amortization On January 1, 2012, Raines, Inc., issued $400,000 of 6%, 15-year bonds for $376,000, yielding an effective interest rate of 8%. Semiannual interest is payable on June 30 and December 31 each year. The firm uses the effective interest method to amortize the discount. Required a. Prepare an amortization schedule showing the necessary information for the first two interest periods. Round amounts to the nearest dollar. b. Prepare the journal entry for the bond issuance on January 1, 2012. c. Prepare the journal entry to record the bond interest payment and discount amortization at June 30. d. Prepare the journal entry to record the bond interest payment and discount amortization at December 31.

a. Balance of Amortization Unamortized End of Period Discount Book Value of Bonds Interest Interest Periodic Interest Paid Expense Year Period at 0 24,000376,000 ssue 2,000 15,040 20,960 0 2 2,000 0 General Tournal Date Description Debit Credit Dec.31 Cash Discount on Bonds Payable 0 Bonds Payable 0 To record issuance of bonds Jun.30 Bond Interest Expense Discount on Bonds Payable+ Cash To record semiannual interest payment and discount amortization Dec.31 Bond Interest Expense 0 Discount on Bonds Payable Cash To record semiannual interest payment