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Problem 14-1 The following amortization and interest schedule reflects the issuance of 10-year bonds by Sage Corporation on January 1, 2011, and the subsequent interest

Problem 14-1

The following amortization and interest schedule reflects the issuance of 10-year bonds by Sage Corporation on January 1, 2011, and the subsequent interest payments and charges. The companys year-end is December 31, and financial statements are prepared once yearly.

Amortization Schedule

Year

Cash

Interest

Amount Unamortized

Carrying Value

1/1/2011 $24,116 $ 189,284
2011 $21,340 $22,714 22,742 190,658
2012 21,340 22,879 21,203 192,197
2013 21,340 23,064 19,479 193,921
2014 21,340 23,271 17,548 195,852
2015 21,340 23,502 15,386 198,014
2016 21,340 23,762 12,964 200,436
2017 21,340 24,052 10,252 203,148
2018 21,340 24,378 7,214 206,186
2019 21,340 24,742 3,812 209,588
2020 21,340 25,152 213,400

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(a) Indicate whether the bonds were issued at a premium or a discount. (b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method (c) Determine the stated interest rate and the effective-interest rate. (Round answers to O decimal places,e.g. 18%.) The stated rate The effective rate (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2011. (If no entry is enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2011

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