XYZ 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 onApril 1 and October 1. The bonds were sold to yield 9% effectiveannual interest. XYZ Corporation closes its books annually onDecember 31.
Instructions
(a) Complete an amortizationschedule for the above bond (for all periods). Round all answers tothe nearest dollar. Use the effective-interestmethod.
(b) Prepare the journal entries forthe 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 incomestatement for the year ended December 31, 2016 and December 31,2017.
(d) Complete an amortization schedule for the above bond (forall periods) using the straight-line amortizationmethod.
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