Effective-interest method of amortizing bond premium

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Reference no: EM131208683

On January 1, 2018, a company issued its 10% bonds in the face amount of $8,000,000, which mature on January 1, 2028. The bonds were issued for $9,080,000 to yield 8%, resulting in bond premium of $1,080,000. Management uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. Using the attached T-account template, prepare the following transactions:

1/1/18 Bond issuance

12/31/18 Interest payment & amortization of bond premium

12/31/19 Interest payment & amortization of bond premium

Reference no: EM131208683

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