On July 1, 2017, Peanuts Inc. issued $400,000 (par value) 10%, ten year bonds, with interest payable semi-annually on January 1 and July 1. The bonds were issued at $454,360 to yield 8%.The corporation uses the effective interest method for amortization of bond premium or discount.

Instructions

a. Prepare the journal entry on the date the bonds were issued.

b. Prepare the adjusting entry at December 31, 2017, the end of the fiscal year.

c. Prepare the entry for the interest payment on January 1, 2018