On January 1, 2016, Knorr Corporation issued $1,400,000 of 7%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 8%. Bond issue costs associated with the bonds totaled $21,540.76.
Required:
Prepare the journal entries to record the following:
January 1, 2016
Sold the bonds at an effective rate of 8%
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
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