Recording Bond Entries and Preparing an Amortization Schedule- Effective Interest Method, Discount, Interest Accrual Mitchell Inc. issued 200 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each July 1 and January 1 and were issued to yield 7%. The bonds mature in three years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first year of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. July 1 of Year 1, interest payment. 3. December 31 of Year 1, interest accrual. 4. January 1 of Year 2, interest payment. (No reversing entries made.)
Recording Bond Entries and Preparing an Amortization Schedule- Effective Interest Method, Discount, Interest Accrual Mitchell Inc. issued 200 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each July 1 and January 1 and were issued to yield 7%. The bonds mature in three years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums. Required a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first year of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. July 1 of Year 1, interest payment. 3. December 31 of Year 1, interest accrual. 4. January 1 of Year 2, interest payment. (No reversing entries made.)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 96PSB
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Transcribed Image Text:Recording Bond Entries and Preparing an Amortization Schedule- Effective Interest Method, Discount, Interest Accrual
Mitchell Inc. issued 200 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each July 1 and
January 1 and were issued to yield 7%. The bonds mature in three years on December 31, and the company uses the effective
interest method to amortize bond discounts or premiums.
Required
a. Determine the selling price of the bonds.
b. Prepare an amortization schedule for the first year of the bond term.
c. Prepare journal entries on the following dates.
1. January 1 of Year 1, bond issuance.
2. July 1 of Year 1, interest payment.
3. December 31 of Year 1, interest accrual.
4. January 1 of Year 2, interest payment. (No reversing entries made.)
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