Problem:
On January 1, 2013, Slapshots issued $200,000 bonds with an 8% stated interest rate. The bonds pay interest on June 30 and December 31. The bonds are due on December 31, 2022.
1. Assume the bonds were sold for $175,075.58 to yield 10%. Prepare a bond amortization schedule for the first year of the bond life using the effective-interest method. Round calculations to the nearest dollar.
2. Prepare the journal entry for paying interest on December 31, 2013.
3. Why did these bonds originally sell at discount?