Effective Interest Discount Amortization
Response to the following problem:
The Cotton Corporation issued $100,000 of 10% bonds dated January 1, 2010, for $97,158.54 on July 1, 2010. The bonds are due December 31, 2013, were issued to yield 11%, and pay interest semiannually on June 30 and December 31. The company uses the effective interest method of amortization.
Required
Record (1) the issuance of the bonds, and (2) the payment of interest and the discount amortization on December 31, 2010, June 30, 2011, and December 31, 2011.