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Prepare the journal entries to record first interest payment

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Question - On January 1, 2016, Knorr Corporation issued $700,000 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 $8,312.46.

Required - 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: EM133063428

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