Instructions

On January $1,$ Year $1,$ Knorr Corporation issued $$1,000,000$ of $9\%,5-$year bonds dated January $1,$ Year $1.$

The bonds pay interest annually on December $31.$ The bonds were issued to yield $10\%.$ Debt issuance

costs associated with the bonds totaled $$18,000.$

Required:

Prepare the journal entries to record the following:

January $1,$ Year $1$

December $31,$ Year $1$

December $31,$ Year $1$

December $31,$ Year $2$

December $31,$ Year $2$

Sold the bonds at an effective rate of $10\%$

First interest payment using the effective interest method

Amortization of bond issue costs using the straight$-$line method

Second interest payment using the effective interest method

Amortization of bond issue costs using the straight$-$line method