PART 1

Salvador, Inc. sells $500,000 of 10% bonds on the authorization date of March 1, 2014. The bonds pay interest semi-annually on March 1 and September 1 of each year, and mature on September 1, 2017. The bonds were sold to yield a 12% interest rate, and sold for $472,090. Salvador uses the effective interest method for bond amortization.

Required:

A) Prepare an amortization table for the bonds from March 1, 2014 through September 1, 2017.

B) Prepare all of the journal entries required for the bonds from March 1, 2014 through December 31, 2015. The company uses December 31 as its year-end.