Bond Investment Discount Amortization Schedule

Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2013.  The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12% and are due January 1, 2016.

Required:

1. Prepare an investment interest income and discount amortization schedule using:

a. straight-line method

b. effective interest method

2. Prepare the July 1, 2015 journal entries to record the interest income under both methods.