Determine effective interest rate for bonds for six months

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On September 1, Year 7, Bob the Builder issues a 10-year bonds with face value of $100,000 at 103. However, the net proceeds from the issuance of bonds is only $102,000 because the company had to pay $1,000 issue costs. Annual rate
of 5.5% coupon is paid at March 1 and September 1. The company records its bonds at amortized cost and uses effective interest rate method for the amortization.

Problem (1) Determine effective interest rate for the bonds for six months.

Problem (2) Prepare the amortization schedule up to September 1, Year 8.

Problem (3) Prepare the journal entry for December 31, Year 7 (fiscal year-end). If the journal entry is not required, please say so (instead of leaving it blank).

Reference no: EM132835357

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