Naylor Company issued $100,000 of 10% bonds on January 1, 2016. The bonds pay interest semiannually on June 30 and December 31 each year, and mature on December 31, 2018. Part 1: Assume the company sells the bonds for $105,242 to yield 8%. Prepare the journal entries to record:
• The sale of the bonds
• Each 2016 semiannual interest payment and premium amortization, using the effective interest method
Part 2: Assume the company sells the bonds for $95,083 to yield 12%. Prepare the journal entries to record:
• The sale of the bonds
• Each 2016 semiannual interest payment and discount amortization, using the effective interest method