Question
On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year bonds at $2,271,813.This price resulted in an effective-interest rate of 8% on the
On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year
bonds at $2,271,813.This price resulted in an effective-interest rate of 8% on the bonds. Atwater
uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual
interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.
(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bond
issue.
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium
on December 31, 2011.
(d) Prepare the journal entry to record the payment of interest and the amortization of the
premium on July 1, 2012, assuming no accrual of interest on June 30.
(e) Prepare the journal entry to record the accrual of interest and the amortization of the
premium on December 31, 2012.
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