Question 4:

Cabot LLC issued $10,000 of 6% bonds on July 1, 2011, due on July 1, 2016. The interest is to be paid twice a year on July 1 and November 1. The bonds were sold to yield 8% effective annual interest. Cabot LLC closes its books annually on December 31. The company uses the effective interest method.

(a) What is the selling price of the bond?

(b) Complete the following amortization schedule for the dates indicated. (Round all answers to the nearest dollar.)

	Cash payment	Interest expense	Amortized discount/premium	Carrying amount of bonds
July 1, 2011
Nov 1, 2011
July 1, 2012

(c) Prepare the journal entry to record the issuance of the bonds.

(d) Prepare the journal entry to record the interest expense on Nov 1, 2011

(e) Prepare the adjusting entry for December 31, 2011.