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    Entries for new bonds issued, interest, amortization, retirement

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    Shopko issues $185,000 of 12%, three-year bonds dated January 1, 2009, that pay interest semiannually on June 30 and December 31. They are issued at $189,620. Their market rate is 11% at the issue date.

    1: Prepare the January 1, 2009, journal entry to record the bonds' life.

    2: Determine the total bond interest expense to be recognized over the bonds' life.

    3: Prepare an effective interest amortization table for the bonds' first two years.

    4: Prepare the journal entries to record the first two interest payments.

    5: Prepare the journal entry to record the bonds' retirement on January 1,2011 at 97

    6: Assume that the market rate on January 1, 2009, is 13% instead of 11%. Without presenting numbers, describe how this change affects the amounts reported on Shopko's financial statements.

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    Solution Summary

    The expert prepares entries for new bonds issued, interest, amortization and retirements.