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Prepare journal entries to record proper interest expense

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Question - Specialty Corporation has issued a $100,000 face value bond with a stated interest rate of 10%, when the market rate of interest was 9%. Because of the favorable interest rate, they were offering the bonds sold for $103,889.65. The bond matures in 5 years and pays interest annually.

a) What is the amortization schedule for the 5-year life of the bond utilizing the effective interest method.

b) Prepare the journal entries (using the effective-interest method) to record the proper interest expense for the first two years of the bond.

Reference no: EM133155843

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