On January 1, 2021, Kyaz Industries Ltd. issued 1,800,000 face value, 5%, 10year bonds at 1,667,518. This
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Question:
On January 1, 2021, Kyaz Industries Ltd. issued £1,800,000 face value, 5%, 10‐year bonds at £1,667,518. This price resulted in an effective‐interest rate of 6% on the bonds. Lock uses the effective‐interest method to amortize bond premium or discount. The bonds pay annual interest January 1.
Required:
- Prepare the journal entry to record the issuance of the bonds on January 1, 2021 and give your interpretation!
- Prepare an amortization table through December 31, 2023 (3 interest periods) for this bond issue and analyze the result!
- Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2021 and give your interpretation!
- Prepare the journal entry to record the payment of interest on January 1, 2022 and give your interpretation!
- Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2022 and analyze the result!
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