Effective Interest Amortization of Premium or Discount
Response to the following problem:
The Taylor Company issued $100,000 of 13% bonds on January 1, 2010. The bonds pay interest semiannually on June 30 and December 31 and are due December 31, 2012.
Required
1. Assume the company sells the bonds for $102,458.71 to yield 12%. Prepare the journal entries to record:
a. The sale of the bonds.
b. Each 2010 semiannual interest payment and premium amortization, using the effective interest method.
2. Assume the company sells the bonds for $97,616.71 to yield 14%. Prepare the journal entries to record:
a. The sale of the bonds.
b. Each 2010 semiannual interest payment and discount amortization, using the effective interest method.