Question

On January 1, 2016, Knorr Corporation issued $1,400,000 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 $27,560.53.

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

Additional Instructions:

– Refer to the PV tables.

– Round answers to 2 decimal places.

– Record your entries on the page that matches the year. For ex. Jan. 1 2016 should be recorded on page 2016.