Given the Following Data, Prepare the Journal Entry to Record

question 173

Essay

Given the following data, prepare the journal entry to record interest expense and any related amortization on December 31st of the first year using the effective method. Assume interest is paid annually on January 1. The bonds were issued on January 1 for $7,411,233.
Bonds Payable $8,000,000 (matures in 10 years)
Contract rate = 5%
Yield = 6%
Round answers to nearest dollar.

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Definitions:

Transfer

The act of moving or conveying property, title, or rights from one entity or person to another.

Negotiable Instrument

A document in writing that ensures the payment of a certain sum of money, either when requested or at a predetermined date, with the document explicitly naming the individual responsible for payment.

Holder in Due Course

A party who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defects in the instrument and previous parties.

Payable on Demand

A financial term indicating that a debt or other financial obligation is due for payment as soon as the lender requests it.