Effective Interest Premium Amortization
Response to the following problem:
Addison Incorporated issued $200,000 of 13% bonds on July 1, 2010, for $206,801.60. The bonds were dated January 1, 2010, pay interest on each June 30 and December 31, are due December 31, 2014, and were issued to yield 12%. The company uses the effective interest method of amortization.
Required
Prepare the journal entries to record the issue of the bonds on July 1, 2010, and the interest payments on December 31, 2010 and June 30, 2011.