P10-10A
Prepare journal entries to record issuance of bonds, payment of interest, and amortization of bond discount using effective interest method.
On January 1, 2014, Lock Corporation issued $ 1,800,000 face value, 5 %
10-year bonds at $ 1,667,518 This price resulted in an effective-interest rate of
6 % on the bonds. Lock uses the effective-interest method to amortize bond premium or
discount. The bonds pay annual interest January 1.
Instructions:( Round all computations to the nearest dollar.)
( a) Prepare the journal entry to record the issuance of the bonds on January 1, 2014.
( b) Prepare an amortization table through December 31, 2016,( three interest periods) for this bond issue.