I.On January 1, 2019, MUVE INC. issued $800,000, 6%, 5-year bonds for $735,110. The bonds were sold to yield an effective-interest rate of 8%. Interest is paid annually on January 1. The company uses the effective-interest method of amortization.
Instructions:
(a)Prepare a bond discount amortization schedule which shows the amortization of discount for the first two interest payment dates. (Round to the nearest dollar).
MAUVE INC.
Bond Discount Amortization
Effective-Interest MethodAnnual Interest Payments
6% Bonds Issued at 8%
Annual
InterestInterest toInterestDiscountUnamortizedCarrying Value
Periods be Paid ExpenseAmortizationDiscount of Bonds
Issue date
1.
2.
B. Prepare the journal entries that Mauve Inc. would make on January 1 and December 31, 2017 and January 1, 2018, related to the bond issue.(including explanations).
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