On December 31, 2016, Fett Corporation issued $980,000, 8%, 10-year bonds for $1,125,824 cash when the market rate of interest was 6%. The bonds pay interest semi-annually each June 30 and December 31. Fett uses the effective interest amortization method to amortize any premium or discount.

A. Give the set up of the basic bond information.

Face Value

Stated Rate of Interest

Annual Stated Interest

Periodic Stated Interest

Bond Price (given)

Premium or Discount (circle one)

B. Give the general journal entry to record the issue of the bonds on December 31, 2106

C. Make a effective interest amortization table for the first four interest payment date (through December 31, 2018).

D. Give the general journal entries necessary for the first interest payment date, June 30, 2017.

E.

1. What amount of interest expense will be reported by Vader on the 2017 income statement?

2. What amount of interest expense will be reported by Vader on the 2018 income statement?

3. What is the total interest expense over the life of the bond?

4. If the straight-line method of amortization had been used, what would be the total interest expense over the life of the bond?

F. Show the balance sheet presentation of the bond liability on December 31, 2018:

Chapter 10-Part 2 Checkpoint #3 Name On December 31, 2016, Fett Corporation issued $980,000, 8%, 10-year bonds for $1,125,824 cash when the market rate of interest was 6%. The bonds pay interest semi-annually each June 30 and December 31. Fett uses the effective interest amortization method to amortize any premium or discount. A. Give the set up of the basic bond information. Face Value Stated Rate of Interest Annual Stated Interest Periodic Stated Interest Bond Price (given) Premium or Discount (circle one) B. Give the general journal entry to record the issue of the bonds on December 31, 2106. DR CR C. Prepare an effective interest amortization table for the first four interest payment date (through December 31, 2018). Periodic Carrying Stated Effective Value Date Interest Interest Amortization of Bond D. Give the general journal entries necessary for the first interest payment date, June 30, 2017. DR CR E. 1. 2. 3. 4. Answer the following questions: What amount of interest expense will be reported by Vader on the 2017 income statement? What amount of intrerest expense will be reported by Vader on the 2018 income statement? What is the total interest expense over the life of the bond? If the straight-line method of amortization had been used, what would be the total interest expense over the life of the bond? F. Show the balance sheet presentation of the bond liability on December 31, 2018