The following amortization and interest schedule is for the issuance of 10-year bonds by Capulet…


The following amortization and interest schedule is for the issuance of 10-year bonds by Capulet Corporation on January 1, 2004, and the subsequent interest payments and charges. The company’s year-end is December 31 and it pre- pares its financial statements yearly Instructions (a) Indicate whether the bonds were issued at a premium or a discount and explain how you can determine this fact from the schedule. (b) Indicate whether the amortization schedule is based on the straight-line method or the effective interest method and explain how you can determine which method is used. Are both amortization methods accepted for financial report- ing purposes? (c) Determine the stated interest rate and the effective interest rate. (d) Based on the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2004. (e) Based on the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2004. (Interest is paid January 1.) (f) Based on the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2012. Capulet Corporation does not use reversing entries.

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