Journal Entries of Long-term bonds
Mike Company issued a $5,000,000 of 8%,10-year bonds on January 1, 2014 for $4,731,582. The market or effective interest rate is 9%. Interest is paid annually on each January 1st, and the effective-interest method of amortization is to be used.
a. Provide the journal entry to record issuance of these long-term bonds.
b. Provide the end of the year adjusting journal entry (for Dec. 31, 2014) to record accrued Interest Expense for this bond (using the effective-interest method of amortization)
c. Provide the journal entry required on Jan. 1, 2015, when the interest is paid.
d. What is the balance of the Discount on Bond Payable Account?
e. What is the Bond Carrying Value that would appear on Mike's 12/31/14 Balance Sheet?