Recording Bond Entries and Preparing an Amortization Schedule Effective Interest Method, Discount, Interest Accrual

Mitchell Inc. issued 280 of its 6%, $1,000 bonds on January 1 of Year 1. The bonds pay cash interest semiannually each July 1 and January 1 and were issued to yield 7%. The bonds mature in three years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums.

Required

a. Determine the selling price of the bonds. b. Prepare an amortization schedule for the first year of the bond term. c. Prepare journal entries on the following dates. 1. January 1 of Year 1, bond issuance. 2. July 1 of Year 1, interest payment. 3. December 31 of Year 1, interest accrual. 4. January 1 of Year 2, interest payment. (No reversing entries made.)

• Bond Selling Price
• Amortization Schedule

Note: Round amounts in Schedule to the nearest whole dollar. Note: Do not use negative signs.

b.	Date	Cash	Interest Expense	Discount Amortization	Bonds Payable, Net
	Jan. 1, Year 1				Answer
	July 1, Year 1	Answer	Answer	Answer	Answer
	Jan. 1, Year 2	Answer	Answer	Answer

• Journal Entries

Note: Round your answers to the nearest whole dollar.

c. Date	Account Name	Dr.	Cr.
1. Jan. 1, Year 1			Answer
			Answer
			Answer
	To record bond issuance.
2. Jul. 1, Year 1			Answer
			Answer
			Answer
	To record interest payment.
3. Dec. 31, Year 1			Answer
			Answer
			Answer
4. Jan. 1, Year 2			Answer
			Answer
	To record interest payment.