Recording Bond Entries and Preparing an Amortization Schedule Effective Interest Method, Premium

Mitchell Inc. issued 120 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each June 30 and December 31 and were issued to yield 5%. The bonds mature in five years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums.

Required

a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first two years of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. June 30 of Year 1, interest payment. 3. December 31 of Year 1, interest payment.

• Bond Selling Price

Note: Round amount to the nearest whole dollar.

a.	Selling price of bonds
	Answer

Amortization Schedule

Note: Round amounts in schedule to the nearest whole dollar. Note: Do not use negative signs.

b.	Date	Cash	Interest Expense	Premium Amortization	Bonds Payable, Net
	Jan 1, Year 1				Answer
	Jun. 30, Year 1	Answer	Answer	Answer	Answer
	Dec. 31, Year 1	Answer	Answer	Answer	Answer
	Jun. 30, Year 2	Answer	Answer	Answer	Answer
	Dec. 31, Year 2	Answer	Answer	Answer

Journal Entries

Note: Round your answers to the nearest whole dollar.

c. Date	Account Name	Dr.	Cr.
			Answer
			Answer
			Answer
	To record bond issuance.
2. Jun. 30, Year 1			Answer
			Answer
			Answer
3. Dec. 31, Year 1			Answer
			Answer
			Answer
	To record interest payment.