Bond price
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KD's Cowboy Bar and Grill Ltd. is a country and western style restaurant and club chain based in Red Deer, Alberta, that specializes in barbecue food and country music. On January 1, 2008, it issued $250,000 face value five-year, semi-annual bonds to provide capital to expand the restaurant chain. The bond rate was 8% and, on the date of sale, the yield rate was 6%. Interest payments are made on June 30 and December 31 each year.
Assume the selling price of these bonds was $275,000. What amount will be reported on the year-end 2008 income statement for the first year's interest expense using the effective interest method? $ ___________
Determine the selling price of these bonds $ ___________ and provide the journal entry to record the sale of the bonds on January 1, 2008.
Cash __________
Premium on Bond Payable __________
Bond payable __________
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The first year interest expense will be calculated by multiplying the market rate with the bonds carrying value.
Effective Interest for the first period will be 6% of 275,000 ...
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