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Problem 1: On September 30, Jose’s Jalapenos Inc., issued $1,000,000 of 10-year 9% bonds sated September...

Problem 1:

On September 30, Jose’s Jalapenos Inc., issued $1,000,000 of 10-year 9% bonds sated September 30, for $1,067,950 an effective (market) rate of 8%. Interest is payable semi-annually on October 1 and April 1. The bonds were purchased by Juan’s Junk and Basura Inc. Present the entries to record the following transactions for the current year on BOTH sets of books: (Issuing Corporation and Investor)

a) Issuance of bonds
b) Accrual of interest and amortization for the period ended December 31. Use the effective interest method for the amortization not the straight-line method.
c) Redemption of the bonds on January 1 at 102.
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