Trial Question:

On December 31, 20X0, Coco Company issued $300,000, 5%, 6-year bonds for $271,400.80. The bonds were sold to yield an effective-interest rate of 7%. Interest is paid annually on December 31. The company uses the effective-interest method of amortization.

1. Prepare a bond discount amortization schedule which shows the amortization of discount for the first two interest payment dates. (Round to the nearest dollar.)

2. Prepare the journal entries that Coco Company would make on December 31, 20X0, and December 31, 20X1, and December 31, 20X2 related to the bond issue.