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Prepare the journal entries to record first interest payment

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On January 1, 2016, Knorr Corporation issued $900,000 of 6%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 7%. Bond issue costs associated with the bonds totaled $10,687.46.

Required:

Question 1: Prepare the journal entries to record the following:

January 1, 2016      Sold the bonds at an effective rate of 7%

December 31, 2016  First interest payment using the effective interest method

December 31, 2016  Amortization of bond issue costs using the straight-line method

December 31, 2017  Second interest payment using the effective interest method

December 31, 2017  Amortization of bond issue costs using the straight-line method

Reference no: EM132607946

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