On January 1, 2016, Knorr Corporation issued $700,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $8,312.46.

Required:

Prepare the journal entries to record the following:

January 1, 2016 - Sold the bonds at an effective rate of 7%

December 31, 2016 - First interest payment using the effective interest method

December 31, 2016 - Amortization of bond issue costs using the straight-line method

December 31, 2017 - Second interest payment using the effective interest method

December 31, 2017 - Amortization of bond issue costs using the straight-line method

PAGE 2016 PAGE 2017 GENERAL JOURNAL Score: 153/193 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 Jan. 1 Cash 7 Discount on Bonds Payable 3 Bonds Payable 700,000.00 4 Jan. 1 Deferred Bond Issue Costs 8,312.46 5 Cash 8,312.46 Dec. 31 Interest Expense Discount on Bonds Payable Cash 42,000.00 9 Dec. 31 Interest Expense 1,662.49 10 Deferred Bond Issue Costs 1,662.49