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Prepare the adjusting entry at December

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Question - On October 1, 2018, Raven Company issued $400,000 par value bonds dated July 1, 2018. The 10-year bonds have a stated rate of 10% and pay interest semiannually on January 1 and July 1. The bonds are issued at $454,200 plus accrued interest, and yield 8%. The effective interest method is used.

a. Prepare the journal entry at the date the bond are issued.

b. Prepare the adjusting entry at December 31, 2018.

c. Prepare the entry for interest payment on January 1, 2019.

d. What would be the difference if we assume that that the straight line method was used instead of the effective interest method in amortizing the discount or premium?

Reference no: EM132556039

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