Lesson 5/6: Bonds Payable/Effective Interest Method

Lario Company issued 10-year bonds on January 1, 2016. The

company’s year-end is December 31, and financial statements are
prepared annually. The amortization and interest schedule below
reflects the bond issuance and the subsequent interest payments
and charges.

AMORTIZATION SCHEDULE
INTEREST INTEREST AMOUNT CARRYING
DATE PAID EXPENSE UNAMORTIZED VALUE
1/1/2016 - - 28,253.00 471,747.00
12/31/2016 55,000.00 56,610.00 26,643.00 473,357.00
12/31/2017 55,000.00 56,803.00 24,840.00 475,160.00
12/31/2018 55,000.00 57,019.00 22,821.00 477,179.00
12/31/2019 55,000.00 57,261.00 20,560.00 479,440.00
12/31/2020 55,000.00 57,533.00 18,027.00 481,973.00
12/31/2021 55,000.00 57,837.00 15,190.00 484,810.00
12/31/2022 55,000.00 58,177.00 12,013.00 487,987.00
12/31/2023 55,000.00 58,558.00 8,455.00 491,545.00
12/31/2024 55,000.00 58,985.00 4,470.00 495,530.00
12/31/2025 55,000.00 59,470.00 - 500,000.00
The bonds were issued at? Premium? Discount? Face Value?
What amortization method is used in the amortization schedule?
What is the nominal (stated) interest rate of the bonds issued
on January 1, 2016?
What is the effective interest rate of the bonds issued on
January 1, 2016?
On the basis of the schedule presented, what is the journal
entry to record the issuance of the bonds on January 1, 2016?