Method of amortizing bond premium

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On 1/1/2015, Starburst Company issued 10-year bonds with a face value of $500,000 at 102. The bonds carry a stated interest rate of 7%, with interest payable semi-annually on January 1 and July 1. Starburst uses the straight-line method of amortizing bond premium or discount.

(a) Prepare the journal entry to record the issuance of the bonds.

(b) Prepare the journal entry to record payment of interest on July 1, 2015.

(c) Prepare the adjusting entry to record the accrual of interest on December 31, 2015.

(d) Prepare the balance sheet presentation for the bond on 12/31/2015.

(e) Prepare the balance sheet presentation for the bond on 12/31/2016.

Reference no: EM131011083

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