Refer to the O’Brien Realty bonds payable in Short Exercise.
In exercise, On December 31, 2014, when the market interest rate is 10%, O’Brien Realty issues $ 800,000 of 7.25%, 10-year bonds payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance.
1. Prepare an amortization table using the effective interest amortization method for the first two semiannual interest periods. (Round all numbers to the nearest whole dollar.)
2. Using the amortization table prepared in Requirement 1, journalize issuance of the bonds and the first two interest payments.