(Supplement 10B) Recording Bond Issuance and Interest Payments (Effective-Interest Amortization)
Complete the requirements of CP10-6, assuming Southwest Corporation uses effective-interest amortization.
CP10-6 (Supplement 10A) Recording Bond Issuance and Interest Payments (Straight-Line Amortization)
Southwest Corporation issued bonds with the following details:
Face value: $600,000
Interest: 9 percent per year payable each December 31
Terms: Bonds dated January 1, 2015, due five years from that date
The annual accounting period ends December 31. The bonds were issued at 104 on January 1, 2015, when the market interest rate was 8 percent. Assume the company uses straight-line amortization and adjusts for any rounding errors when recording interest expense in the final year.
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