On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%, 5-years bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 10%. Bond issue costs associated with the bonds totaled $18,000.

Required:

1. Prepare the journal entries to record the following:

Jan. 1, 2016 - Sold the bonds at an effective rate of 10%

Dec. 31, 2016- First interest payment using the effective interest method

Dec. 31, 2016- Amortization of bonds issue cost using the straight-line method

Dec. 31, 2016- Second interest payment using the effective interest method

Dec. 31,2016- Amortization of bond issued costs using the straight-line method