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Bond price

Please explain the steps to find the amounts.

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 __________

Solution Preview

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 ...

Solution Summary

The solution does a great job of answering the question. The solution is very easy to follow along and can be understood by anyone with a basic understanding of the subject. Overall, an excellent response to the questions being asked.

$2.19