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On December 31, 2015 bonds with a total face value of 100,000 and an annual states coupon rate of 8% are sold for 95,025.30. The bonds mature in 3 years and the annual effective market rate is 10%. Interest is payable annually on December 31.
A. Prepare a journal entry to record the issuance of the bonds on December 31 2015.
B. Prepare the journal entry (or entries) to record the first interest payment on December 31 2016 and the amortization of premium using: 1. The straight line method 2. The effective interest rate method
c. Prepare the journal entry to record the early retirement on June 30 2017 of 40,000 face value (40%) of the bonds at a cash price of 101. Cash was paid to retire the bonds and the straigh line method was being used for premiums and discounts. Do not prepare entries to bring interest and amortization up to date but assume hear were recorded.
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