Tagawa Corporation issued $600,000 of 10-year, 8% bonds on January 1, 2014, for $642,637. This price resulted in a market interest rate of 7% on the bonds. Interest is payable semi-annually on July 1 and January 1. Tagawa has a December 31 year end. On January 1, 2015 immediately after making and recording the semiannual interest payment, the bonds were redeemed at 104.
Instructions
(a) Record the issue of the bonds on January 1, 2014.
(b) Prepare an amortization schedule through to December 31, 2015 (four interest periods).
(c) Record the payment of interest on July 1, 2014.
(d) Record the accrual of interest on December 31, 2014.
(e) Record the redemption of the bonds on January 1, 2015.