On April 1, 2012, Edward Company Issues $2,500,000 of 6

question 100

Essay

On April 1, 2012, Edward Company issues $2,500,000 of 6%, 5-year bonds, with interest payments made each October 1 and April 1. The bonds are issued at 98. Edward Company amortizes any premium or discount using the straight-line method.
1. Prepare the journal entry on April 1 to issue the bonds.
2. Prepare the journal entry on October 1 to record the payment of interest and the amortization of any discount or premium.
3. Prepare the journal entry on December 31 to record accrued interest and the amortization of any discount or premium.

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Definitions:

Civil Aeronautics Board

A former federal agency in the United States responsible for regulating the air transport industry until its deregulation in the early 1980s.

Sherman Act

An 1890 United States antitrust law that outlaws monopolistic practices and promotes competition.

Price-fixing

An illegal agreement among competitors to set prices at a certain level, rather than competing naturally in the market.

Tying Contracts

Agreements where the sale of one product (the tying product) is conditioned on the buyer purchasing another product (the tied product).