Needing help to solve this problem for Intermediate Accounting II

EX.14-04 Algo

On January 1, 2016, Knorr Corporation issued $900,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $10,687.46.

Required:

January 1, 2016	Sold the bonds at an effective rate of 7%
	journal entries to record the following:
December 31, 2016	First interest payment using the effective interest method
December 31, 2016	Amortization of bond issue costs using the straight-line method
December 31, 2017	Second interest payment using the effective interest method
December 31, 2017	Amortization of bond issue costs using the straight-line method

CHART OF ACCOUNTSKnorr CorporationGeneral Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
195	Deferred Bond Issue Costs
198	Accumulated Depreciation
	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
255	Bonds Payable
256	Premium on Bonds Payable
257	Discount on Bonds Payable
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings
	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

General Journal

journal entries to record the following:

Additional Instructions Use PV Tables, Round to nearest 2 decimal places, record entries that match year

January 1, 2016	Sold the bonds at an effective rate of 7%
December 31, 2016	First interest payment using the effective interest method
December 31, 2016	Amortization of bond issue costs using the straight-line method
December 31, 2017	Second interest payment using the effective interest method
December 31, 2017	Amortization of bond issue costs using the straight-line method

PAGE 2016

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

PAGE 2017

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

Table 3 - Present Value of 1:

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