The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2004, and the subsequent interest payments and charges. The companys year-end is December 31, and financial statements are prepared once yearly.

Amortization Schedule

Year Cash Interest Amount Unamortized Book Value

1/1/2004 $5,651 $ 94,349

2004 $1,000 $11,322 5,329 94,671

2005 11,000 11,361 4,968 95,032

2006 11,000 11,404 4,564 95,436

2007 11,000 11,452 4,112 95,888

2008 11,000 11,507 3,605 96,395

2009 11,000 11,567 3,038 96,962

2010 11,000 11,635 2,403 97,597

2011 11,000 11,712 1,691 98,309

2012 11,000 11,797 894 99,106

2013 11,000 11,894 100,000

Instructions

(a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.

(b) Indicate whether the amortization schedule is based on the straight-line method or the effectiveinterest method and how you can determine which method is used.

(c) Determine the stated interest rate and the effective interest rate.

(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2004.

(e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2004. (Interest is paid January 1.)

(f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2011. Capulet Corporation does not use reversing entries.