Given the following data Bonds payable, maturing in 10 years $8,000,000 Contract interest rate 5 Market (effective) interest rate 6 Assume interest is paid annually on January 1 The bonds were issued on January 1 for $7,411,233 Required Prepare the journal entry to record interest expense and any related amortization on December 31 of the first year using the effective interest rate method Refer to the Chart of Accounts for exact wording of account titles Round answers to nearest dollar CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 113 Allowance for Doubtful Accounts 114 Notes Receivable 115 Interest Receivable 121 Merchandise Inventory 122 Supplies 131 Prepaid Insurance 140 Land 151 Building 152 Accumulated Depreciation Building 153 Equipment 154 Accumulated Depreciation Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 241 Notes Payable 242 Interest Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 511 Bad Debt Expense 512 Credit Card Expense 513 Cash Short and Over 521 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Rent Expense 535 Insurance Expense 536 Supplies Expense 551 Depreciation Expense Building 552 Depreciation Expense Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds

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Given the following data: Bonds payable, maturing in 10 years = $8,000,000 Contract interest rate = 5% Market (effective) interest rate = 6% Assume interest

Given the following data: Bonds payable, maturing in 10 years = $8,000,000 Contract interest rate = 5% Market (effective) interest rate = 6% Assume interest is paid annually on January 1. The bonds were issued on January 1 for $7,411,233. Required: Prepare the journal entry to record interest expense and any related amortization on December 31 of the first year using the effective interest rate method. Refer to the Chart of Accounts for exact wording of account titles. Round answers to nearest dollar.

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
113	Allowance for Doubtful Accounts
114	Notes Receivable
115	Interest Receivable
121	Merchandise Inventory
122	Supplies
131	Prepaid Insurance
140	Land
151	Building
152	Accumulated Depreciation-Building
153	Equipment
154	Accumulated Depreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Salaries Payable
231	Sales Tax Payable
241	Notes Payable
242	Interest Payable
251	Bonds Payable
252	Discount on Bonds Payable
253	Premium on Bonds Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue
611	Gain on Redemption of Bonds

	EXPENSES
510	Cost of Merchandise Sold
511	Bad Debt Expense
512	Credit Card Expense
513	Cash Short and Over
521	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Repairs Expense
534	Rent Expense
535	Insurance Expense
536	Supplies Expense
551	Depreciation Expense-Building
552	Depreciation Expense-Equipment
590	Miscellaneous Expense
710	Interest Expense
711	Loss on Redemption of Bonds