Question 1: Bonds issued at a Discount

On February 1, 2017, Fireswirl Corp. issued a $900,000, 5% two-year bond. Interest is payable semi-annually each August 1, and February 1.

Calculate the bond issue price assuming a market interest rate of 6% on the date of issue.

Using the effective interest method, prepare an amortization schedule for the term of the bond.

Record the entry for the issuance of the bond on February 1, the adjusting entry to accrue bond interest and related amortization on March 31, 2017, Fireswirl Corps year-end, and the payment of interest on August 1, 2017.

Period ending	Cash interest paid	Period interest expense	Discount/ Premium Amortization	Unamortized discount/ premium	Carrying value

General Journal
Date	Account Titles and Explanation	Debit	Credit

Question 3: Bonds issued at a Premium

On March 31, 2017, Fireswirl Corp. issued a $900,000, 5% two-year bond. Interest is payable semi-annually each September 30, and March 31.

Calculate the bond issue price assuming a market interest rate of 4.5% on the date of issue.

Using the effective interest method, prepare an amortization schedule for the term of the bond.

Record the entry for the issuance of the bond on March 31, and the first payment of interest on September 30, 2017.

Period ending	Cash interest paid	Period interest expense	Discount/ Premium Amortization	Unamortized discount/ premium	Carrying value

General Journal
Date	Account Titles and Explanation	Debit	Credit

Question 4: Redemption of bonds

Michelle Corporation calls in $250,000 (par value) bonds with a carrying value of $247,950. Michelle is required to redeem the bonds at the par value. Record the journal entry to retire the bonds.

General Journal
Date	Account Titles and Explanation	Debit	Credit