China Company issued $1,000,000 of6-year, 12% bonds, effective interest rate is13%. The bonds were purchased by USA Co. on theissue date at the issueprice.
Present entries to record the following transactions:
(a)
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ChinaCompany
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(1)
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Issuance ofbonds.
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(2)
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Payment of firstsemiannual interest on December 31, 2006.
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(3)
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Amortization bystraight-line method of bond premium or discount on December 31,2006.
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(b)
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USACompany
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(1)
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Purchase ofbonds.
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(2)
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Receipt of firstsemiannual interest amount on December 31, 2006.
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(3)
(4)
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Amortization bystraight-line method of bond premium or discount on December 31,2006.
Sale of Bonds at101, less broker's fees of 2,300. The unamortized premium ordiscount balance at time of sale is $10,000, and accrued interestwas 1,000.
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