On January 1, 2016, Knorr Corporation issued $1,000,000 of 9%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 10%. Bond issue costs associated with the bonds totaled $18,000. Required: Prepare the journal entries to record the following: January 1, 2016 Sold the bonds at an effective rate of 10% December 31, 2016 First interest payment using the effective interest method December 31, 2016 Amortization of bond issue costs using the straight-line method December 31, 2017 Second interest payment using the effective interest method December 31, 2017 Amortization of bond issue costs using the straight-line method

Explanation:

We are to prepare the journal entries for the following :

January 1, 2016             Sold the bonds at an effective rate of 10%

December 31, 2016       First interest payment using the effective interest                  

                                       method

December 31, 2016       Amortization of bond issue costs using the straight-

                                       line method

December 31, 2017       Second interest payment using the effective interest

                                      method

December 31, 2017      Amortization of bond issue costs using the straight-line

                                      method

The Journal entries can be prepared in an illustrative table format as shown below:

Date       Account Title                            Debit  ($)             Credit ($)

2016        Cash                                        962091.83

Jan 1      Discount  on bonds payable

             $( 1000000 - 962091.83)         37908.17

            Bond Payable                                                         1000000.00

            TO record issue of  bonds

Jan 1       Deferred Bond Issue                 18000.00

              Cash                                                                          18000.00

2016      Interest expense            

             (962091.83 × 10%)                    96209.18

Dec 31   Discount on bond payable                                          6209.18

             Cash  (1000000 × 9%)                                               90000.00

            TO record the payment of semi-annual interest

2016      Interest expense  

             (18000 + 5 years)                        3600.00

Dec 31    Deferred bond issue costs                                        3600.00

            TO record the amortization of bonds on issue costs

2017     Interest expense

            (962091.83 + 6209.18) × 10%       96830.10

Dec 31    Discount on bond payable                                         6830.10

             Cash  (1000000 × 9%)                                               90000.00

            TO record the payment of semi-annual interest

2017   Interest expense

          (18000 + 5 years)                            3600

Dec 31    Deferred bond issue costs                                        3600.00

            TO record the amortization of bonds on issue costs

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).