Semi-Annual Interest to Interest Unamortized Bond
Interest Period be Paid Expense Amortization Balance Carrying Value
June 30,2014 23,740 223,740
1 Dec 31,2014 12,000 10,070 1,930 21,810 221,810
this is rounded up a bit to come out even
2 June 30, 2015
Instructions: On the basis of the above information, answer the following questions. When you compute the interest rates, round all percentages to 3 decimal places. For example, if you get a .0550610, round it to .055 which is 5.5% every 6 months,or 11% for an annual interest rate.
1. Prepare the journal entry to record the sale of the bond issue on June 30, 2014.
2. Prepare the journal entry to record the payment of interest and amortization on December 31, 2014.
3. What was the selling price of the bonds as a percentage of the face value? _______%.
4. What is the stated interest rate for this bond issue? _______% How did you find this number?
5. What is the market interest rate for this bond issue? _______% How did you find this number?
6. What is the total cost of borrowing over the life of the bond? $__________________ How did you find this number?
7. Fill in the missing numbers for the second interest period on the amortization table above.
8. How will the bonds be listed on the Balance Sheet on December 31, 2014? LONG TERM LIABILITIES
9. What is the carrying value of the bonds at the maturity date? $____________
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.