Using the information provided in ­BE14- 16, determine the issue price of the bonds, assuming that the market rate of interest is 4%, and prepare the amortization table for the first two years, assuming Stark uses the effective interest rate method.
In –BE14 - 16
On January 1, 2016, Stark Incorporated issued $ 1,500,000 par value, 5%, seven- year bonds ( i. e., there were 1,500 $ 1,000 par value bonds in the issue). Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1. Determine the issue price of the bonds based on an 8% market rate of interest. Prepare the amortization table for the first two years, assuming Stark uses the effective interest rate method.