(Accounting for bonds, LO 3, 4) On November 1, 2005 Nordin Inc. (Nordin)

issued a $2,000,000 bond with a 7% coupon rate and a maturity date of October 31, 2010. Interest is paid annually on October 31. The effective interest rate for a bond of this type on November 1, 2005 was 9%. Nordin’s year end is October 31.

Required:

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

b. Prepare the journal entry to record issue of the bond on November 1, 2005.

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 interest payment to investors on October 31 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.