Bonds and Journal Entries

Part I
3-year bonds with a stated interest rate of 10% and a face value totaling $650,000 were issued on January 1, 2011. Assume that interest is computed annually andthe market rate of interest is 9%.
1. Compute the issue price of the bonds and prepare the interest amortization table for the life of the bonds. (show work)
2. Prepare the journal entries for all of 2011.

Part II
On January 1, 2011, a company sells a 3-year bond with a face value of $45,000 and a stated interest rate of 8%. The market interest rate is 6%, The company usesthe effective interest method of amortization. Fill in Table A. Fill in Table B assuming the market interest rate is 10%, and the company received only $42,762 forthe bond and the company uses the effective-interest method.


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