Problem
On September 30, Jose's Jalapenos Inc., issued $1,000,000 of 10-year 9% bonds sated September 30, for $1,067,950 an effective (market) rate of 8%. Interest is payable semi-annually on October 1 and April 1. The bonds were purchased by Juan's Junk and Basura Inc. Present the entries to record the following transactions for the current year on BOTH sets of books: (Issuing Corporation and Investor)
• Issuance of bonds
• Accrual of interest and amortization for the period ended December 31. Use the effective interest method for the amortization not the straight-line method.
• Redemption of the bonds on January 1 at 102.