Lorance Corporation issued $400,000, 7%, 20-year bonds on January 1, 2017, for $360,727. This price resulted in

Question:

Lorance Corporation issued $400,000, 7%, 20-year bonds on January 1, 2017, for $360,727. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Lorance uses the effective-interest method to amortize bond premium or discount.

Instructions

Prepare the journal entries to record the following. (Round to the nearest dollar.)

(a) The issuance of the bonds.

(b) The accrual of interest and the discount amortization on December 31, 2017.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...