Problem: Logan Corporation issued $800,000 of 8% bonds on October 1, 2006, due on October 1, 2011. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Logan Corporation closes its books annually on December 31.
Instructions
Q1. Complete the following amortization schedule for the dates indicated. (Round all answers to the nearest dollar.) Use the effective-interest method.
Debit Credit Carrying Amount
Credit Cash Interest Expense Bond Discount of Bonds
01-Oct-06 $738,224
01-Apr-07
01-Oct-07
Q2. Prepare the adjusting entry for December 31, 2007. Use the effective-interest method.
Q3. Compute the interest expense to be reported in the income statement for the year ended December 31, 2007.