Stone Company Issued a $1,000,000, 5-Year Bond on January 1

Stone Company issued a $1,000,000, 5-year bond on January 1, 2016. The bond was dated January 1, 2016 with an 8% coupon rate, paying interest annually on December 31, and was issued for $1,084,250 at a time when the market rate of interest was 6%. Stone uses the effective-interest method to account for its bonds.
Required:
Prepare the necessary journal entry for each of the following dates (round your answers to the nearest whole dollar amount):
(a) January 1, 2016
(b) December 31, 2016
(c) December 31, 2017

Correct Answer:

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(a) January 1, 2016 ...

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