On the basis of the schedule above prepare the journal

Reference no: EM13575876

The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2006, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are prepared once yearly.

Amortization Schedule
Year	Cash	Interest	Amount Unamortized	Carrying Value
1/1/2006			$14,578	$ 114,422
2006	$12,900	$13,731	13,747	115,253
2007	12,900	13,830	12,817	116,183
2008	12,900	13,942	11,775	117,225
2009	12,900	14,067	10,608	118,392
2010	12,900	14,207	9,301	119,699
2011	12,900	14,364	7,837	121,163
2012	12,900	14,540	6,197	122,803
2013	12,900	14,736	4,361	124,639
2014	12,900	14,957	2,304	126,696
2015	12,900	15,204		129,000

(a) Indicate whether the bonds were issued at a premium or a discount.

(b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method.

(c) Determine the stated interest rate and the effective-interest rate. (Round answers to 0 decimal places, e.g. $38,548.)

The stated rate			%
The effective rate			%

(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2006. (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

(e) On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2006. (Interest is paid January 1.) (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

(f) On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2013. Capulet Corporation does not use reversing entries. (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2013

Dec. 31, 2013

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Reference no: EM13575876

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