Problem;
On March 1, 2014, Oaken Furniture Co. issued $700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in 10 years. Oaken Furniture Co. is a calendar-year corporation.
Required:
Question 1: Determine the issue price of the bonds. Please show your computations.
Question 2: Prepare an amortization table through the first two interest periods using the effective-interest method.
Question 3: Prepare the journal entries to record bond-related transactions as of the following dates:
- March 1, 2014
- August 31, 2014
- December 31, 2014
- February 28, 2015