Question

# On January 1, 2016, Knorr Corporation issued \$1,000,000 of 9%,...

On January 1, 2016, Knorr Corporation issued \$1,000,000 of 9%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 10%. Bond issue costs associated with the bonds totaled \$18,000.

Required:

Prepare the journal entries to record the following:

January 1, 2016 Sold the bonds at an effective rate of 10%

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

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