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Calculate the amortization of bond issue costs

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Question: On January 1, 2016, Knorr Corporation issued $900,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $10,687.46.

Required: Prepare the journal entries to record the following:

January 1, 2016

Sold the bonds at an effective rate of 7%

December 31, 2016

First interest payment using the effective interest method December 31, 2016

Amortization of bond issue costs using the straight-line method December 31, 2017

Second interest payment using the effective interest method December 31, 2017

Amortization of bond issue costs using the straight-line method

Reference no: EM132719213

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