Assume that $140,000 of Denham Springs School District 8% bonds are sold on the bond issue date
Question:
Assume that $140,000 of Denham Springs School District 8% bonds are sold on the bond issue date for $128,598. Interest is payable semiannually, and the bonds mature in 15 years. The purchase price provides a return of 9% on the investment.
1. What entries would be made on the investor’s books for the receipt of the first two interest payments, assuming premium or discount amortization on each interest date by
(a) The straight-line method and
(b) The effective-interest method?
2. What entries would be made on Denham Springs School District’s books to record the first two interest payments, assuming premium or discount amortization on each interest date by
(a) The straight-line method and
(b) The effective-interest method? (Round to the nearest dollar.)
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen