The amortization and interest schedule on page 692 reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2009, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.

Instructions

(a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.

(b) Determine the stated interest rate and the effective-interest rate.

(c) On the basis of the schedule, prepare the journal entry to record the issuance of the bonds on January 1, 2009.

(d) On the basis of the schedule, prepare the journal entry or entries to reflect the bond transactions and accruals for 2009. (Interest is paid January 1.)

(e) On the basis of the schedule, prepare the journal entry or entries to reflect the bond transactions and accruals for 2016. Capulet Corporation does not use reversing entries.

Transcribed Image Text:

Year Cash Interest 1/1/2009 Amortization Schedule Amount Unamortized Book Value 94,349 5,651 2009 11,000 11,322 5,329 94,671 2010 11,000 11,361 4,968 95,032 2011 11,000 11,404 4,564 95,436 2012 11,000 11,452 4,112 95,888 2013 11,000 11,507 3,605 96,395 2014 11,000 11,567 3,038 96,962 2015 11,000 11,635 2,403 97,597 2016 11,000 11,712 1,691 98,309 2017 11,000 11,797 894 99,106 2018 11,000 11,894 100,000