The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2006, and the subsequent interest payments and charges. The company's year-end is December 31, and financial statements are prepared once yearly.
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Amortization Schedule
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Year
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Cash
|
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Interest
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Amount
Unamortized
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Carrying
Value
|
| 1/1/2006 |
|
|
|
|
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$14,578 |
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$ 114,422 |
| 2006 |
|
$12,900 |
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$13,731 |
|
13,747 |
|
115,253 |
| 2007 |
|
12,900 |
|
13,830 |
|
12,817 |
|
116,183 |
| 2008 |
|
12,900 |
|
13,942 |
|
11,775 |
|
117,225 |
| 2009 |
|
12,900 |
|
14,067 |
|
10,608 |
|
118,392 |
| 2010 |
|
12,900 |
|
14,207 |
|
9,301 |
|
119,699 |
| 2011 |
|
12,900 |
|
14,364 |
|
7,837 |
|
121,163 |
| 2012 |
|
12,900 |
|
14,540 |
|
6,197 |
|
122,803 |
| 2013 |
|
12,900 |
|
14,736 |
|
4,361 |
|
124,639 |
| 2014 |
|
12,900 |
|
14,957 |
|
2,304 |
|
126,696 |
| 2015 |
|
12,900 |
|
15,204 |
|
|
|
129,000 |
(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 0 decimal places, e.g. $38,548.)
| The stated rate |
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% |
| The effective rate |
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% |
(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2006. (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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(e) On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2006. (Interest is paid January 1.) (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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(f) On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2013. Capulet Corporation does not use reversing entries. (Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Date
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Account Titles and Explanation
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Debit
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Credit
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Jan. 1, 2013
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Dec. 31, 2013
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