Netwerk Inc. issued $1,500,000 of 5-percent, 10-year bonds payable and received cash proceeds of $1,388,419 on March

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Netwerk Inc. issued $1,500,000 of 5-percent, 10-year bonds payable and received cash proceeds of $1,388,419 on March 31, 2014. The market interest rate at the date of issuance was 6 percent, and the bonds pay interest semiannually.

1. Did the bonds sell at a premium or a discount?

2. Prepare an effective-interest amortization table for the bond discount, through the first two interest payments. Use Exhibit 15-4 as a guide, and round amounts to the nearest dollar. Students can use a financial calculator if so instructed.

3. Record Netwerk Inc.'s issuance of the bonds on March 31, 2014, and on September 30, 2014, payment of the first semiannual interest amount and amortization of the bond discount. Explanations are not required.

EXHIBIT 15-4 Effective-Interest Method of Amortizing a Bond Discount Panel A: Bond Data Maturity value $1,000,000 Stated

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Accounting

ISBN: 978-0132690089

9th Canadian Edition volume 2

Authors: Charles T. Horngren, Walter T. Harrison Jr., Jo Ann L. Johnston, Carol A. Meissner, Peter R. Norwood

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