Question
The Putnam Corporation issued $500,000 four year bonds on January 1, 2016 with a stated rate of interest of 6%. The market rate of interest
The Putnam Corporation issued $500,000 four year bonds on January 1, 2016 with a stated rate of interest of 6%. The market rate of interest at that time was 4%. The company pays interest annually.
Requirements:(show all work)
1. Determine the issue price of the bond
2. Prepare a four year amortization table for the bond issue assuming that Putnam uses the effective interest rate method of amortization.
3. Prepare the journal entries to record the bond issue and interest payment on 12/31/2016. Assume the company uses a discount or premium account, if needed.
4. Describe the income statement, balance sheet and cash flow statement effects of the bond issue and amortization of the bond discount or premium.
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