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The XYZ Co. sold $3,000,000, 8%, 10 year bonds on January 1, 2021. The bonds were dated January 1, 2021, and pay interest on January 1. The company uses the effective interest method to amortize bond premiums and discounts. Financial statements are prepared annually.

a) Prepare the journal entries to record the issuance of the bonds assuming they are sold at:

(1) 103 (i.e. 103% of face) due to the market interest rate of 7%

(2) 98 (i.e. 98% of face) due to the market interest rate of 8.5%

b) Prepare amortization tables for both assumed sales for the first three interest payments.

c) Prepare the journal entries to record interest expense for 2021 under both of the bond issuances assumed in part (a).

d) Show the long-term liabilities balance sheet presentation for both of the bond issuances assumed in part (a) at 12/31/2021.

GENERAL JOURNAL Account Debit Credit Date 1/1/21 (a) (1) (a) (2) 1/1/21 (b) (1) Col. A Interest to be paid Col. B Interest Expense to be recorded Col. C Premium Amortization Face Value Col. D Unamortized Premium Col. E Carrying Value 1/1/21 12/31/21 12/31/22 12/31/23 (b) (2) Col. A Interest Col. B Interest Expense to be recorded Col. C Discount Amortization Face Value Col. D Unamortized Discount Col. E Carrying Value to be paid 1/1/21 12/31/21 12/31/22 12/31/23 GENERAL JOURNAL Account Debit Credit Date 12/31/21 c) (1) c) (2) 12/31/21 d) (1) Long Term Liabilities: Bonds Payable d) (2) Long Term Liabilities: Bonds Payable

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