On January 1, 2015, the Tara Clothing Corporation issued $ 900,000 par value, 5%, six- year bonds.

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On January 1, 2015, the Tara Clothing Corporation issued $ 900,000 par value, 5%, six- year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2015. The market rate of interest on the date of the bond issue was 8%. Bond issue costs are $ 72,727. The company’s fiscal year ends on December 31.
Required
a. Determine the issue price of the debt.
b. Prepare the amortization table for the bond issue, assuming that Tara uses the effective interest rate method of amortization.
c. Prepare the journal entries necessary to account for the bonds for the first year ( January 1, 2015, through January 1, 2016). Assume the company uses a premium or discount account, if needed.
d. Prepare the journal entries to record the interest accrual and amortization for year three.
e. Prepare the journal entry to record payment of the bonds at maturity. Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-0132162302

1st edition

Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

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