Intermediate Accounting: P14-3 On January 1, 2011, Bradley Recreational Products

Intermediate Accounting
Problem 14-3 Straight-line and effective interest compared
On January 1, 2011, Bradley Recreational Products isused $100,000, 9%, four-year bonds. Interest is paid semianually on June 30 and December 31. The bonds were issued at $96,768 to yield an annual return of 10%.Required:
a. Prepare an amortization schedule that determines interst at the effective interest rate.
b. Prepare an amortization schedule by the straght-line method
c. Prepare the journal entries to record interest expense on June 30, 2013, by each of the two approaches.
d. Explain why the pattern of interest differs between the two methods.
e. Assuming the market rate is still 10%, what price would a second investor pay the first investor on June 30, 2013, for $10,000 of the bonds?