P&J Chase Company sells $500,000 of 10% bonds on November 1, 2007. The bonds pay interest on May 1 and November 1 and are to yield 12%. The due date on the bonds is May 1, 2011. The accounting period is the calendar year. No reversing entries are made. Bond premium or discount is to be amortized at interest dates and at year-end.
Instructions:
(a) Compute the price of the bonds at the issuace date.
(b) Prepare the amortization schedule for the issue.
(c) Prepare all of the relevant journal entries for this bond issue from the date of issuance through may 2009.