Reference no: EM13483423

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 in December 31, and financial statements are prepared once yearly.

Amortization Schedule

Year                Cash                Interest                        Amount Unamortized             Carrying Value

1/1/2008                                                                      $5,651                                    $94,349

     2008           $11,000           $11,322                       5,329                                       94,671

     2009           11,000           11,361                       4,968                                           95,032

     2010           11,000           11,404                        4,564                                          95,436

     2011           11,000            11,452                       4,112                                          95,888

     2012           11,000             11,507                       3,605                                         96,395

     2013           11,000            11,567                       3,038                                          96,962

     2014             11,000           11,635                       2,403                                         97,597

     2015           11,000           11,712                       1,691                                          98,309

     2016           11,000             11,797                      894                                      99,106

     2017           11,000           11,894                                                                          100,000

a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule.

b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method, and how you can determine which method is used.

c) Determine the stated interest rate and the effective-interest rate.

d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2008.

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)

f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions that accruals for 2015. Capulet Corporation does not use reversing entries.