A Company Issued 10-Year Bonds with a Par Value of $20,000,000

question 72

Essay

A company issued 10-year bonds with a par value of $20,000,000 and an 8% annual face rate of interest on January 2,Year 1.The issue price of the bond issue was $19,866,397 which reflected an 8.1% effective interest rate.Interest payments are made annually.
Required:
A) Give the journal entry to record the issuance of the bonds.
B) Give the journal entry to record the recognition of interest expense at December 31, Year 1. Any premium or discount should be amortized using the effective interest rate method.

C) Give the journal entry to record the interest paid to the bondholders on January 2, Year 2.
Give the journal entry to record the recognition of interest expense at December 31 , Year 2. Any premium or discount should be amortized using the effective interest rate method.

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