Reference no: EM131802278

Bond discount amortization.

On January 1, 2013, Everly Bottle Company sold $2,000,000 in long-term bonds for$1,754,200. The bonds will mature in 10 years and have a stated interest rate of 8% anda yield rate of 10%. The bonds pay interest annually on Dec 31 of each year. The bondsare to be accounted for under the effective-interest method.

Instructions

(a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each Dec 31. Include only the first fouryears. Make sure all columns and rows are properly labeled. (Round to the nearest dollar.)

(b) Assuming that interest and discount amortization are recorded each Dec 31 , preparethe entry to record the issuance of the bonds on January 1, 2013 and adjusting entry tobe made on December 31, 2015. (Round to the nearest dollar.)

(c) Assuming the Call Price on the Bonds was 102 and the 100% of the bonds were reacquired on 12/31/16, prepare the adjusting entry at the time of the re acquisition to record the early extinguishment of debt