Comprehensive
Response to the following problem:
The Batson Corporation issued $800,000 of 12% face value bonds for $851,705.70. The bonds were dated and issued on April 1, 2010, are due March 31, 2014, and pay interest semiannually on September 30 and March 31. The company sold the bonds to yield 10%.
Required
1. Prepare a bond interest expense and premium amortization schedule using the straight-line method.
2. Prepare a bond interest expense and premium amortization schedule using the effective interest method.
3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2010, using:
a. The straight-line method of amortization
b. The effective interest method of amortization
4. Assume the company retires the bonds on June 30, 2011, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using:
a. The straight-line method of amortization
b. The effective interest method of amortization.