# Question

On January 1, 2013, Wells Corp. sold $100,000 of its own 6 percent, 10-year bonds. Interest is payable annually on December 31. The bonds were sold to yield an effective interest rate of 5 percent. Wells Corp. uses the effective interest rate method. The bonds sold for $104,330.

Required

a. Prepare the journal entry for the issuance of the bonds.

b. Prepare the journal entry for the amortization of the bond premium and the payment of the interest on December 31, 2015. (Assume effective interest amortization.)

c. Prepare the journal entry for the amortization of the bond premium and the payment of interest on December 31, 2015. (Assume straight-line amortization.)

d. Calculate the amount of interest expense for 2016. (Assume effective interest amortization.)

e. Calculate the amount of interest expense for 2016. (Assume straight-line amortization.)

Required

a. Prepare the journal entry for the issuance of the bonds.

b. Prepare the journal entry for the amortization of the bond premium and the payment of the interest on December 31, 2015. (Assume effective interest amortization.)

c. Prepare the journal entry for the amortization of the bond premium and the payment of interest on December 31, 2015. (Assume straight-line amortization.)

d. Calculate the amount of interest expense for 2016. (Assume effective interest amortization.)

e. Calculate the amount of interest expense for 2016. (Assume straight-line amortization.)

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