Question

On January 1, 2016, a company issues 3-year bonds with a face value of $200,000 and a stated interest rate of 8%. Because the market interest rate is lower than the stated interest rate, the company receives $209,000 for the bond. The company uses straight-line bond amortization.

Required:

Part a. Determine the amount of the premium that will be amortized during the year ending December 31, 2016.

Part b. Prepare the journal entry to record the first interest payment on December 31, 2016.

Answer

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