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Leong Corporation was authorized to issue $500,000 face value bonds on January 1, 2015. The corporation issued $100,000 of face value bonds on that date. The bonds will mature on December 31, 2018. Interest is paid semi-annually on June 30 and December 31 each year. The bond interest rate per the terms of the indenture is 12% per year.
Required: Answer the questions for each of the following cases.
Case A: The bonds were issued at face value.
Case B: The bonds were issued for $112,000.
Case C: The bonds were issued for $88,000.
- How much cash does Leong receive for the bonds?
- How much annual interest must the corporation pay? On what amount does the corporation pay?
- Prepare the journal entry to record the sale of the bonds.
- Record the entries applicable to interest and straight-line amortization for June 30, 2015 and for December 31, 2015.
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