The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent
The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.BLEMS
\r\nAmortization Schedule
\r\nAmount Carrying
\r\nYear Cash Interest Unamortized Value
\r\n1/1/2008 $5,651 $ 94,349
\r\n2008 $11,000 $11,322 5,329 94,671
\r\n2009 11,000 11,361 4,968 95,032
\r\n2010 11,000 11,404 4,564 95,436
\r\n2011 11,000 11,452 4,112 95,888
\r\n2012 11,000 11,507 3,605 96,395
\r\n2013 11,000 11,567 3,038 96,962
\r\n2014 11,000 11,635 2,403 97,597
\r\n2015 11,000 11,712 1,691 98,309
\r\n2016 11,000 11,797 894 99,106
\r\n2017 11,000 11,894 100,000
\r\nInstructions
\r\n(a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.
\r\n(b) Indicate whether the amortization schedule is based on the straight-line method or the effectiveinterest method, and how you can determine which method is used.
\r\n(c) Determine the stated interest rate and the effective-interest rate.
\r\n(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on
\r\nJanuary 1, 2008.
\r\n(e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2008. (Interest is paid January 1.)
\r\n(f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2015. Capulet Corporation does not use reversing entries.