On January 1, 2012, Quinton Corporation issued $600,000 of 7% bonds that are due in 10 years. The bonds were issued for $559,229 and pay interest each July 1 and January 1. The company uses the effective interest method. Assume an effective rate of 8%.
(a) Prepare the company’s journal entry for the January 1 issuance.
(b) Prepare the company’s journal entry for the July 1 interest payment.
(c) Prepare the company’s December 31 adjusting entry.
(d) Assume that the effective interest of 8% was not given in the data. Prove the effective interest rate of 8% using a financial calculator or computer spreadsheet function.
(e) Prepare the first three payments of an effective-interest amortization table for the bonds.