Process E I-IV

Aid issued these notes on June 30, Consider the 9.75% notes due June 2016" Assume that Rite Aid issued these and that the company pays interest on June 30 of each year e. i. According to note 11, the proceeds of the notes at the time of of the made when theset value of the notes. Prepare the journal entry that Rite Aid must have were 98.2% were issued. At what effective annual rate of interest were these notes issued? ii. iii. Assume that Rite Aid uses the effective interest rate method to account for thi table that folows to prepare an amortization schedule for these notes. Use the a even though the expense Ue verify that each year's interest expense reflects the same interest rate eve though the changes. Note: Guidance follows the table. Interest Payment Interest Bond Discount Net Book Expense Amortization|alueofDeb 1 Date June 30, S 402,620 2009 June 30, $ 39.975 2010 June 30, 2011 June 30, 2012 June 30, 2013 June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2009 Net Book Value of Debt is the initial proceeds of the bond issuance, net of costs The face value of this debt is $410,000; the discount is $1,380, the coupon rate is 9.75% and the effective rate (including fees) is 10.1212%. Interest Payment is the face value of the bond times the coupon rate of the bond. Interest Expense equals opening book value of the debt times the effective interest rate. The difference between the interest payment and interest expense is the amortizat not the bond discount. This is equivalent to saying that interest expense equals the paid plus the amortization of the bond discount. Amortizing the discount increases the net book value of the bond each year. c o iv. Based on the above information, prepare the journal entry that Rite Aid would have February 27, 2010, to accrue interest expense on these notes