Answer:
a) $520
b)$1,820
2) $3,900
Explanation:
a) For issue at 99, we have:
IWe first find the proceeds for when the bond is issued at 99, we have:
Proceeds = Asset's Par value x (issue rate /100)
= $52,000 x (99 / 100)
= $51, 480
Now, let's find the bond premium or discount:
Bond premium = Proceeds - Par value
$51, 480 - $52,000
= $520
b) For bonds issued at 103½, we have:
Let's find the proceeds when the bond is issued at 103½:
Proceeds = $52,000 x (103.½ / 100)
= $53,820
We now find the the bond premium or discount:
Bond premium = Proceeds - Par value
= $53,820 - $52,000
= $1,820
2) To find the interest paid semi-annually, we have:
Interest paid = Par value of the bonds x semi-annual interest rate.
Interest paid = $20,000 x (15%/2)
Interest paid = $52,000 x 7.5%
= 52,000 × 0.075
= $3,900
Answer:
A.) Journal entry:
Cash($52,000, 99) —--------$51,480
Discount on bond -————$520
Cash($52,000, 103.5) —$53,820
Bond premium -————$1,820
B. $3,900
Explanation:
GIVEN the following;
Par value of bonds = $52,000
Interest rate = 15% (semi annually)
A.) Issuance at 99
$52,000 × 0.99 = $51,480.00
Discount on bond = $520.00
b.) Issuance at 103.5
$52,000 × 1.035 = $53820
Journal entry:
Cash($52,000, 99) —--------$51,480
Discount on bond -————$520
Cash($52,000, 103.5) —$53,820
Bond premium -————$1,820
2.) INTEREST PAID IN CASH TO BOND HOLDERS EVERY 6 MONTHS ;
Interest amount = bond value × rate
Rate = 15%
Semi annual rate = 15%÷ 2 = 0.075
$52,000 × 0.075 = $3,900
Therefore, interest paid to bondholders every six months is $3,900
