On January 1, 2016, Knorr Corporation issued $800,000 of 6%, 5-year bonds dated January 1, 2016....

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On January 1, 2016, Knorr Corporation issued $800,000 of 6%,5-year bonds dated January 1, 2016. The bonds pay interest annuallyon December 31. The bonds were issued to yield 7%. Bond issue costsassociated with the bonds totaled $18,848.31. Required: Prepare thejournal entries to record the following: January 1, 2016 Sold thebonds at an effective rate of 7% December 31, 2016 First interestpayment using the effective interest method December 31, 2016Amortization of bond issue costs using the straight-line methodDecember 31, 2017 Second interest payment using the effectiveinterest method December 31, 2017 Amortization of bond issue costsusing the straight-line method

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Solution Computation of bond price Table values are based on n 5 i 7 Cash flow Table Value Amount Present Value Par Maturity Value 0712986 80000000 570389 Interest Annuity 4100197 4800000 196809 Price of bonds 767198 Bond Amortization See Answer

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