On January 1, 2018, LMU, Inc. issued $250,000 of 6%, 10 year bonds for $216,025, yielding an
Question:
On January 1, 2018, LMU, Inc. issued $250,000 of 6%, 10 year bonds for $216,025, yielding an effective interest rate of 8%. Semiannual interest is payable on June 30 and December 31 each year. The company uses the effective interest method to amortize the discount.
REQUIRED:
a) Prove the issue price using present value analysis.
b) Prepare an amortization table showing the necessary information for the first two interest periods.
c) Prepare the journal entry for the bond issuance on January 1.
d) Prepare the journal entry to record the bond interest payment and discount amortization at June 30.
e) Prepare the journal entry to record the bond interest payment and discount amortization at December 31.
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,