LRNA Company issued $380,000, 7%, 10-year bonds on January 1, 2017, for $407,968. This price resulted in

Question:

LRNA Company issued $380,000, 7%, 10-year bonds on January 1, 2017, for $407,968. This price resulted in an effective-interest rate of 6% on the bonds. Interest is payable annually on January 1. LRNA uses the effective-interest method to amortize bond premium or discount.

Instructions

Prepare the journal entries to record the following. (Round to the nearest dollar.)

(a) The issuance of the bonds.

(b) The accrual of interest and the premium amortization on December 31, 2017.