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:

1.Prepare the journal entries to record the following:
January 1, 2016Sold the bonds at an effective rate of 10%
December 31, 2016First interest payment using the effective interest method
December 31, 2016Amortization of bond issue costs using the straight-line method
December 31, 2017Second interest payment using the effective interest method
December 31, 2017Amortization of bond issue costs using the straight-line method
2.Assume that the company uses IFRS and that it issued the bonds for net proceeds (after deducting the bond issue costs of $18,000) of $944,091.83, which is consistent with an effective interest rate of 10.49%. Prepare the journal entries for the sale of the bonds and the first two interest payments.