(Accounting for bonds, LO 3, 4) On February 1, 2006 Jura Corp. (Jura) issued a

$12,000,000 bond with an 8% coupon rate and a maturity date of January 31, 2012.

Interest is paid annually on January 31. The effective interest rate for a bond of this type on February 1, 2006 was 8%. Jura’s year end is January 31.

Required:

a. What will be the proceeds from the bond issue?

b. Prepare the journal entry to record issue of the bond on February 1, 2006.

c. Prepare an amortization schedule using both the straight-line and effective interest methods for any premium or discount that arose on issue of the bond.

d. Prepare the journal entry required to record the interest expense and the inter- est payment to investors on June 30 of each year over the life of the bond.

Make the entries for both the straight-line and effective interest amortization methods.

e. Prepare the journal entry required to record the retirement of the bond on maturity.