Chapter 10, Problem 10.23E

(a)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

 Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.

To prepare: The journal entry to record issue of bonds for Company H on January 1, 2017.

(b)

To determine

To prepare: The adjustment entry to record accrual of interest and bonds premium amortization for Company H on December 31, 2017.

(c)

To determine

To prepare: The journal entry to record the payment of accrued interest for Company H on January 1, 2018.