On January 1, 2013, Slapshots issued $200,000 bonds with an 8% stated interest rate. The bonds pay interest on June 30 and December 31. The bonds are due on December 31, 2022.
1. Assume the bonds were sold for $175,075.58 to yield 10%. Prepare a bond amortization schedule for the first year of the bond life using the effective-interest method. Round calculations to the nearest dollar.
2. Prepare the journal entry for paying interest on December 31, 2013.
3. Why did these bonds originally sell at discount?
See the attached file. Thanks
Face Value of Bind $200,000
Coupon Rate 8.00%
Discount Rate 10%
Coupon Payments per year 2
Time to maturity 10 years
PV of the principal repayment ` $ 75,377.90
PV of the semi-annual coupon interest payments $ 99,697.68
This post shows how to calculate the bond amortization schedule and journal entries during the first year.