Interest Payments and Jobbs Company

1. Jobbs Company issues 10%, five-year bonds, on December 31, 2010, with a par value of $100,000 and semiannual interest payments. Use the following straight-line bond, amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2010; (b) the first interest payment on June 30, 2011; and (c) the second interest payment on December 31, 2011.

Semiannual Period-End Unamortized Premium Carrying Value
(0) 12/31/2010 $8,111 $108,111
(1) 6/30/2011 7,300 107,300
(2) 12/31/2011 6,489 106,489

2. Matchbox Company issues 6%, four-year bonds, on December 31, 2011, with a par value of $100,000 and semiannual interest payments. Use the following straight-line bond amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2011, (b) the first interest payment on June 30, 2012; and (c) the second interest payment on December 31, 2012.

Semiannual Period-End Unamortized Premium Carrying Value
(0) 12/31/2011 $6,733 $93,267
(1) 6/30/2012 5,891 94,109
(2) 12/31/2012 5,049 94,951

3. Jester Company issues bonds with a par value of $600,000 on their stated issue date. The bonds mature in 10 years and pay 6% annual interest in semiannual payments. On the issue date, the annual market rate for the bond is 8%.

1. What is the amount of each semiannual interest payment for these bonds?
2. How many semiannual interest payments will be made on these bonds over their life?
3. Use the interest rates given to determine whether the bonds are issued at par, at a discount, or at a premium.
4. Compute the price of the bonds as of their issue date.
5. Prepare the journal entry to record the bonds issuance.

4. Metro Company issues bonds with a par value of $75,000 on their stated issue date. The bonds mature in five years and pay 10% annual interest in semiannual payments. On the issue date, the annual market rate for the bond is 8%.

1. What is the amount of each semiannual interest payment for these bonds?
2. How many semiannual interest payments will be made on these bonds over their life?
3. Use the interest rates given to determine whether the bonds are issued at par, at a discount, or at a premium.

5. On January 1, 2011, Randa borrows $25,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of accrued interest and principal on December 31 of each year from 2011 through 2014.

1. Compute the amount of each of the four equal total payments.
2. Prepare an amortization table for this installment note.