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Problem 14-1

The following amortization and interest schedule reflects the issuance of 10-year bonds by Sage Corporation on January 1, 2011, and the subsequent interest payments and charges. The companys year-end is December 31, and financial statements are prepared once yearly.

Amortization Schedule
Year		Cash		Interest		Amount Unamortized		Carrying Value
1/1/2011						$24,116		$ 189,284
2011		$21,340		$22,714		22,742		190,658
2012		21,340		22,879		21,203		192,197
2013		21,340		23,064		19,479		193,921
2014		21,340		23,271		17,548		195,852
2015		21,340		23,502		15,386		198,014
2016		21,340		23,762		12,964		200,436
2017		21,340		24,052		10,252		203,148
2018		21,340		24,378		7,214		206,186
2019		21,340		24,742		3,812		209,588
2020		21,340		25,152				213,400

(a) Indicate whether the bonds were issued at a premium or a discount. (b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method (c) Determine the stated interest rate and the effective-interest rate. (Round answers to O decimal places,e.g. 18%.) The stated rate The effective rate (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2011. (If no entry is enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2011

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