Question - Summit Limited issued $8,000,000 in bonds on 31 December 2015. The bonds mature on 31 December 2019, and bear interest at 6% per annum, payable every 30 June and 31 December. The bonds were issued to yield 8% per annum. Summit's fiscal year ends on 31 December. Summit uses the effective-interest method of amortization.
Required:
1. Calculate the proceeds from issuance.
2. Prepare the effective-interest amortization schedule for the bond.
3. Prepare the journal entries for the first year of the bond.