Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 21

(Supplement 10A) Recording Bond Issue, Interest Payments (Straight-Line Amortization), and Early Bond Retirement
On January 1, 2012, Loop Raceway issued 600 bonds, each with a face value of $1,000, a stated interest rate of 5% paid annually on December 31, and a maturity date of December 31, 2014. On the issue date, the market interest rate was 6 percent, so the total proceeds from the bond issue were $583,950. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year.
Required:
1. Prepare a bond amortization schedule.
2. Give the journal entry to record the bond issue.
3. Give the journal entries to record the interest payments on December 31, 2012 and 2013.
4. Give the journal entry to record the interest and face value payment on December 31, 2014.
5. Assume the bonds are retired on January 1, 2014, at a price of 98. Give the journal entries to record the bond retirement.