Prepare the journal entries for the first year of the bond

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Question - Summit Limited issued $8,000,000 in bonds on 31 December 2015. The bonds mature on 31 December 2019, and bear interest at 6% per annum, payable every 30 June and 31 December. The bonds were issued to yield 8% per annum. Summit’s fiscal year ends on 31 December. Summit uses the effective-interest method of amortization.

Required:

1. Calculate the proceeds from issuance.

2. Prepare the effective-interest amortization schedule for the bond.

3. Prepare the journal entries for the first year of the bond.

Reference no: EM131583031

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