Question

Novak Corporation issued $400,000,7%, 20-year bonds on January 1, 2022, for $360,728. This price resulted in an effective interest rate of 8% on the bonds. Interest is payable annually on January 1. Novak uses the effective-interest method to amortize bond premium or discount. - Your answer is partially correct. Prepare the schedule using effective interest method to amortize bond premium or discount of Novak. (Round answers to 0 decimal places, e.g. 5,275.) Interest Periods Interest to Be Paid Interest Expense to Be Recorded Discount Amortization Unamortized Discount Bond Carrying Value Issue Issue $ $ 360728 date 28000 28000 e Textbook and Media List of Accounts Your answer is correct. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2022 Cash 360728 Discount on Bonds Payable 39272 Bonds Payable 400000

Answer 1

Amortization table

Interest periods	Interest to be paid	Interest expense to be recorded	Discount amortization	Unamortized discount	Bond carrying value
Issue date				39272	360728
1	28000	28858	858	38414	361586
2	28000	28927	927	37487	362513

Journal entry

date	account and explanation	Debit	Credit
Dec 31,2022	Interest expense	28858
	Discount amortization		858
	Interest payable		28000

Journal entry

date	account and explanation	Debit	Credit
Jan 1, 2023	Interest payable	28000
	Cash		28000