On December 31, 2017, Digital Connections issued 8%, 10-year bonds payable.

QUESTION:

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On December 31, 2017, Digital Connections issued 8%, 10-year bonds payable with a maturity value of $500,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 9%, and the issue price of the bonds is 94. Digital Connections amortizes bonds by the effective-interest method.

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Requirements:

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1. Prepare an effective-interest-method amortization table for the first four semi-annual interest periods.

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2. Journalize the following transactions:

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a. Issuance of the bonds on December 31, 2017. Credit Bonds Payable.

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b. Payment of interest and amortization of the bonds on June 30, 2018

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c. Payment of interest and amortization of the bonds on December 31, 2018

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3. Show how Digital Connections would report the remaining bonds payable on its balance sheet at December 31, 2018?

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