NOTE INTEREST PAYMENT AND INTEREST EXPENSE (EFFECTIVE INTEREST)
Cardinal Company sold $200,000 of 10-year, 8 percent notes for $175,075. The notes were sold December 31, 2007, and pay interest semiannually on June 30 and December 31. The effective interest rate was 10 percent. Assume Cardinal uses the effective interest rate method.
Required:
1. Prepare the entry to record the sale of the notes.
2. Determine the amount of the semiannual interest payments for the notes.
3. Prepare the amortization table through 2009.
4. Prepare the entry for Cardinal's journal at June 30, 2008 to record the payment of six months' interest and the related interest expense.
5. Determine interest expense for 2009.