Problem 9. Effective-Interest Rate Method: Bonds Issued at Premium & Discount (4.2 content area)

9.1 On Jan. 1, 2018, UMPI, Inc. issued $600,000, of 10% bonds, due in 5 years. The bonds pay interest semi-annually on July 1 and January 1. The bonds effective yield 8%. UMPI uses the effective-interest method (see PV Tables Below). Prepare UMPIs journal entries for A,B, and C.

A. The January 1 issuance

B. The July 1 interest payment

C. The December 31 adjusting journal entry

D. Prepare a full Bond Amortization Schedule

Present Value of an Ordinary Annuity (interest) of 1 Present Value of an Ordinary Annuity of $1 Present Value of a Single Sum TABLE 2 Present Value of $1 PV=(1+i)$1