The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The company's year-end in December 31, and financial statements are prepared once yearly.
Amortization Schedule
Year Cash Interest Amount Unamortized Carrying Value
1/1/2008 $5,651 $94,349
2008 $11,000 $11,322 5,329 94,671
2009 11,000 11,361 4,968 95,032
2010 11,000 11,404 4,564 95,436
2011 11,000 11,452 4,112 95,888
2012 11,000 11,507 3,605 96,395
2013 11,000 11,567 3,038 96,962
2014 11,000 11,635 2,403 97,597
2015 11,000 11,712 1,691 98,309
2016 11,000 11,797 894 99,106
2017 11,000 11,894 100,000
a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.
b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used.
c) Determine the stated interest rate and the effective-interest rate.
d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2008.
e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2008. (Interest is paid January 1)
f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions that accruals for 2015. Capulet Corporation does not use reversing entries.