On July 1, 2014, Flanagin Corporation issued $2,000,000, 10%, 10-year bonds at $2,271,813. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.
Instructions:
(Round all computations to the nearest dollar.)
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(a)
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Prepare the journal entry to record the issuance of the bonds on July 1, 2014.
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(b)
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Prepare an amortization table through December 31, 2015 (3 interest periods), for this bond issue.
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(c)
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Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2014.
Amortization $9,127
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(d)
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Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2015, assuming no accrual of interest on June 30.
Amortization $9,493
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(e)
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Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2015.
Amortization $9,872
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