The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet SpA on January 1, 2016, 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 at 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, 2016.

d. On the basis of the schedule, prepare the journal entry or entries to reflect the bond transactions and accruals for 2016. (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 2023. Capulet does not use reversing entries.

Transcribed Image Text:

Amortization Schedule Amount Year Cash Interest Unamortized Book Value 1/1/2016 €5,651 € 94,349 2016 €11,00o €11,322 5,329 94,671 2017 11,000 11,361 4,968 95,032 2018 11,000 11,404 4,564 95,436 2019 11,000 11,452 4,112 95,888 2020 11,000 11,507 3,605 96,395 2021 11,000 11,567 3,038 96,962 2022 11,000 11,635 2,403 97,597 2023 11,000 11,712 1,691 98,309 2024 11,000 11,797 894 99,106 2025 11,000 11,894 100,000