Ike issues $180,000 of 11%, three-year bonds dated January 1, 2021, that pay interest semiannually on June 30 and December 31. They are issued at $184,566 when the market rate is 10%.

Required

1. Prepare the January 1 journal entry to record the bonds’ issuance.

2. Determine the total bond interest expense to be recognized over the bonds’ life.

3. Prepare an effective interest amortization table like Exhibit 14B.2 for the bonds’ first two years.

4. Prepare the journal entries to record the first two interest payments.

Exhibit 14B.2

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EXHIBIT 14B.2 Effective Interest Amortization of Bond Premium $102,765 $101,888 $100,967 GIOCO $100,000 Carrying value|------ T $103,600 12/31/21 6/30/22 12/31/22 6/30/23 Bonds Payable 12/31/2023 100,000 12/31/23 12/31/2021 100,000 6/30/2022 12/31/2022 6/30/2023 12/31/2023 0 Bonds: $100,000 Par Value, Semiannual Interest Payments, Two-Year Life, 6% Semiannual Contract Rate, 4.9851% Semiannual Market Rate (C) (D) (B) Bond (A) Cash Interest Paid Interest Expense Premium Amortization Unamortized Premium 6% × $100,000 4.9851% X Prior (E) (A) - (B) Prior (D)-(C) (0) 12/31/2021 $3,600 (1) 6/30/2022 $ 6,000 $ 5,165 $ 835 2,765 (2) 12/31/2022 6,000 5,123 877 1,888 (3) 6/30/2023 6,000 5,079 921 967 (4) 12/31/2023 6,000 5,033 967 0 $24,000 $20,400 $3,600 Column (A) is the par value ($100,000) multiplied by the semiannual contract rate (6%). Column (B) is the prior period's carrying value multiplied by the semiannual market rate (4.9851%). Column (C) is the difference between interest paid and bond interest expense, or [(A) - (B)]. Column (D) is the prior period's unamortized premium less the current period's premium amortization. Column (E) is the par value plus unamortized premium, or [$100,000+ (D)]. Semiannual Interest Period-End (E) Carrying Value $100,000+ (D) $103,600 102,765 101,888 100,967 100,000