On January 1, 2010, the Calvert Company issues 12%, $100,000 face value bonds for $103,545.91, a price

Question:

On January 1, 2010, the Calvert Company issues 12%, $100,000 face value bonds for $103,545.91, a price to yield 10%. The bonds mature on January 1, 2012. Interest is paid semiannually on June 30 and December 31.

Required

1. Prepare a bond interest expense and premium amortization schedule using the straight-line method.

2. Prepare a bond interest expense and premium amortization schedule using the effective interest method.

3. Prepare the journal entries to record the interest payments on June 30, 2010 and December 31, 2010, using both methods.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...