Reference no: EM133128014
Question - Master Corp. issued 5%, $240,000 bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1 and January 1, and were issued to yield 6%. The bonds mature on January 1, 2030, and the company uses the effective interest method to amortize bond discounts or premiums.
Required -
a. Prepare journal entries on the following dates.
1. January 1, 2020-Issuance of bonds.
2. July 1, 2020-Interest payment.
3. December 31, 2020-Interest accrual.
4. January 1, 2021-Interest payment.
b. Answer part a, assuming instead that the company uses the straight-line interest method to amortize discounts and premiums and the bonds were sold on March 1, 2020, for $221,986 (excluding accrued interest).