On December 31, 2010, Hawthorne Corporation issued for $155,989, five-year bonds with a face amount of $150,000

Question:

On December 31, 2010, Hawthorne Corporation issued for $155,989, five-year bonds with a face amount of $150,000 and a stated (or coupon) rate of 9 percent. The bonds pay interest annually and have an effective interest rate of 8 percent. Assume Hawthorne uses the effective interest rate method.


Required:

1. Prepare the entry to record the sale of the bonds.

2. Calculate the amount of the interest payments for the bonds.

3. Prepare the amortization table through 2012.

4. Prepare the journal entry for December 31, 2011 to record the payment of interest and the related interest expense.

5. Calculate the annual interest expense for 2011 and 2012.


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...
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