Cathy’s Copper Products Inc. was authorized to issue $1,000,000 of face value bonds.
|
Date of authorization |
Term |
Interest rate |
Interest payment dates |
|
January 1, 2017 |
3 years |
12% |
Semi-annually on June 30 and December 31 |
The following transactions occurred during 2017.
|
Jan. |
1 |
Issued $100,000 of bonds |
|
Jun. |
30 |
Paid the semi-annual interest on the issued bonds and made an entry to record straight-line amortization |
|
Dec. |
31 |
Paid the semi-annual interest on the issued bonds and made an entry to record amortization. |
Required: Answer the questions for each of these cases.
Case A: the bonds were issued when the market rate of interest was 12%.
Case B: the bonds were issued when the market rate of interest was 16%.
Case C: the bonds were issued when the market rate of interest was 8%.
- Calculate
- the amount of each semi-annual interest payment on the issued bonds;
- the present value of the bonds; and
- the amount of amortization applicable to each interest payment date (use the effective interest method of amortization.
- Prepare journal entries to record the 2017 transactions.
- 1250 reads
