On July 1, 2008, Tardis Company issued $4,000,000 face value, 8%, 10-year bonds at $3,501,514.This price resulted in an effective-interest rate of 10% on the bonds.
Tardis uses the effective-interest method to amortize bond premium or discount.
The bonds pay semiannual interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entries to record the following transactions.
(1) The issuance of the bonds on July 1, 2008.
(2) The accrual of interest and the amortization of the discount on December 31, 2008.
(3) The payment of interest and the amortization of the discount on July 1, 2009, assuming no accrual of interest on June 30.
(4) The accrual of interest and the amortization of the discount on December 31, 2009.
(b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2009, balance sheet.
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