On December 31, 2017, Digital Connections issued 8%, 10-year bonds payable with a maturity value of $500,000.

Question:

On December 31, 2017, Digital Connections issued 8%, 10-year bonds payable with a maturity value of $500,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 9%, and the issue price of the bonds is 94. Digital Connections amortizes bonds by the effective-interest method.

Requirements

1. Prepare an effective-interest-method amortization table for the first four semi-annual interest periods.

2. Journalize the following transactions:

a. Issuance of the bonds on December 31, 2017. Credit Bonds Payable.

b. Payment of interest and amortization of the bonds on June 30, 2018

c. Payment of interest and amortization of the bonds on December 31, 2018

3. Show how Digital Connections would report the remaining bonds payable on its balance sheet at December 31, 2018?

Balance Sheet
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