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Foster Incorporated sold $500,000 of 10% bonds on January 1, 2019 for a price that yields a 12% interest rate. The bonds pay interest semi-annually
Foster Incorporated sold $500,000 of 10% bonds on January 1, 2019 for a price that yields a 12% interest rate. The bonds pay interest semi-annually on June 30 and December 31. The bonds are due December 31, 2023. Foster uses the effective interest method.
Instructions:
- Determine the selling price of the bonds on January 1, 2019
- Prepare the amortization schedule using the effective interest method.
- Prepare the journal entries for 2019.
- Assume the company reacquired the bonds on July 1, 2022, at 104 and prepare journal entry to record the retirement of the bonds.
- Assume Foster Incorporated used the straight-line method to amortize the premium or discount. Prepare the journal for June 30, 2019 to record interest expense.
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