Problem 14-3 (Static) Straight-line and effective interest compared [LO14-2]

On January 1, 2024, Reyes Recreational Products issued $100,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $96,768 to yield an annual return of 10%.

Required:

1.Prepare an amortization schedule that determines interest at the effective interest rate.

2.Prepare an amortization schedule by the straight-line method.

3.Prepare the journal entries to record interest expense on June 30, 2026, by each of the two approaches.

5.Assuming the market rate is still 10%, what price would a second investor pay the first investor on June 30, 2026, for $10,000 of the bonds?

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)