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?© BrainMass Inc. brainmass.com July 20, 2018, 6:38 pm ad1c9bdddf
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.