P10-10B

Effective Interest Amortization

On January 1, Rainer, Inc., issued

$300,000

of

10%

15

-year bonds, for

$351,876

,

yielding an effective interest rate of

8%

. Semiannual interest is payable on June 30 and December 31 each year.

The firm uses the effective interest method to amortize the premium.

Required

a.

Prepare an amortization schedule showing the necessary information for the first two interest periods. Round amounts to the nearest dollar.

b.

Prepare the journal entry for the bond issuance on January 1.

c.

Prepare the journal entry to record the bond interest payment and premium amortization at June 30.

d.

Prepare the journal entry to record the bond interest payment and premium amortization at December 31.