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