P11A-6A Calculating and recording bonds when stated rate and market rate are
different [20–25 min]
Relaxation is authorized to issue 14%, 10-year bonds payable. On January 2, 2012,
when the market interest rate is 16%, the company issues $500,000 of the bonds and
receives cash of $451,130. Relaxation amortizes bond discount by the effectiveinterest
method. Interest dates are January 2 and July 2.
Requirements
1. Prepare an amortization table for the first two semiannual interest periods.
Follow the format of Exhibit 11A-1.
2. Journalize the issuance of the bonds payable and the first semiannual interest
payment on July 2.
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