Question

Park Corporation is planning to issue bonds with a face value of $750,000 and a coupon rate of 7.5 percent. The bonds mature in 4 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and does not use a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

E10-9 Part 2

2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answer to whole dollars.)

Answer 1

Solution 2:

Computation of bond price
Table values are based on:
n=	8
i=	4.25%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.71679	$750,000.00	$537,593
Interest (Annuity)	6.66378	$28,125.00	$187,419
Price of bonds			$725,011

Journal Entries - Park Corporation
Date	Particulars	Debit	Credit
30-Jun	Interest expense Dr ($725,011*8.50%*6/12)	$30,813.00
	To Bond Payable		$2,688.00
	To Cash		$28,125.00
	(To record semiannual interest payment)