Bond interest and discount amortization.

scooters corporation issued $900,000 of 7% bonds on october 1, 2016, due on october 1, 2021. the interest is to be paid twice a year on april 1 and october 1. the bonds were sold to yield 9% effective annual interest. bu curriculum corporation closes its books annually on december 31.

instructions

(a) complete an amortization schedule for the above bond (for all periods) in a similar format as below. (round all answers to the nearest dollar.) use the effective-interest method.

date

credit

cash

debit

interest expense

credit

bond discount

carrying amount of bonds

oct. 1, 2016

use the pv formula in excel; see posted bond excel sheet in the classroom

apr. 1, 2017

….continue schedule (use excel)

(b) prepare the journal entries for the following:

1. october 1, 2016 bond issue

2. adjusting entry for december 31, 2016 (adjusting entry should cover 2 months)

3. april 1, 2017 entry

4. october 1, 2017 entry

5. adjusting entry from december 31, 2017

(c) compute the interest expense to be reported in the income statement for the year

ended december 31, 2016 and december 31, 2017.

(d) complete an amortization schedule for the above bond (for all periods) using the straight-line amortization method (entries are not required).