Problem: Shopko issues $185,000 of 12%, three-year bonds dated January 1, 2009, that pay interest semiannually on June 30 and December 31. They are issued at $189,620. Their market rate is 11% at the issue date.
1: Prepare the January 1, 2009, journal entry to record the bonds' life.
2: Determine the total bond interest expense to be recognized over the bonds' life.
3: Prepare an effective interest amortization table for the bonds' first two years.
4: Prepare the journal entries to record the first two interest payments.
5: Prepare the journal entry to record the bonds' retirement on January 1,2011 at 97
6: Assume that the market rate on January 1, 2009, is 13% instead of 11%. Without presenting numbers, describe how this change affects the amounts reported on Shopko's financial statements.