| Following is an amortization table for an issue of three-year bonds on January 1, 2011: | ||||||||
| Effective | Contractual | Carrying | ||||||
| Carrying Value at | Interest | Interest | Amortization | Value End | ||||
| Year | Beginning of Year | Incurred | to be Paid | of Principal | Of Year | |||
| 2011 | $105,154 | $8,412 | $10,000 | $1,588 | $103,566 | |||
| 2012 | $103,566 | $8,285 | $10,000 | $1,715 | $101,851 | |||
| 2013 | $101,851 | $8,148 | $10,000 | $1,852 | $100,000 | |||
| Total | $24,845 | $30,000 | $5,155 | |||||
| Required: | Place you answer in the shaded boxes below with any computations to the right | |||||||
| A. How much were the bonds sold for? | ||||||||
| B. What is the stated (contractual) rate of interest? | ||||||||
| C. What is the effective rate of interest? | ||||||||
| D. Record the entries necessary over the life of the bonds for the issuance, retirement and yearly interest accrual. | ||||||||
| You do not need to record the payment of interest. | ||||||||
| Date | Account Title | Debit | Credit | |||||
| 1/1/11 | Cash | The accounts for the first entry have been entered | ||||||
| Premium on Bonds Payable | enter the amounts and record the remaining entries. | |||||||
| Bonds Payable | Start each entry opposite the date | |||||||
| 12/31/11 | ||||||||
| 12/31/12 | ||||||||
| 12/31/13 | ||||||||
| 12/31/13 | ||||||||
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