A Company Issued 10%, 10-Year Bonds with a Par Value

Essay

A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, at a selling price of $885,295 when the annual market interest rate was 12%. The company uses the effective interest amortization method. Interest is paid semiannually each June 30 and December 31.
(1) Prepare an amortization table for the first two payment periods using the format shown below:
$\begin{array}{|l|l|l|l|l|l|}\hline\text { Semiannual } & \text { Cash } & \text { Bond } & & & \\\hline \text { Interest } & \text { Interest } & \text { Interest } & \text { Discount } & \text { Unam ortized } & \text { Carrying } \\\hline \text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Discount } & \text { Value } \\\hline\\\hline\\\hline\\\hline\\\hline\end{array}$ (2) Prepare the journal entry to record the first semiannual interest payment.