E$12$B$-31$ Journalizing bond transactions using the effective$-$interest

amortization method

Journalize issuance of the bond and the first semiannual interest payment under

each of the following three assumptions. The company amortizes bond premium

and discount by the effective$-$interest amortization method. Explanations are not

required.

Seven$-$year bonds payable with face value of $$83,000$ and stated interest rate of

$10\%,$ paid semiannually. The market rate of interest is $10\%$ at issuance. The pres$-$

ent value of the bonds at issuance is $$83,000.$

Same bonds payable as in assumption $1,$ but the market interest rate is $16\%.$ The

present value of the bonds at issuance is $$62,433.$

Same bonds payable as in assumption $1,$ but the market interest rate is $8\%.$ The

present value of the bonds at issuance is $$91,727.$