Question

On January 1, 2015, Piper Co. Issued ten-year bonds with a face valueof $3,000,000 and a...

On January 1, 2015, Piper Co. Issued ten-year bonds with a face valueof $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%.

Questions:

1) Calculate the issue of price of the bonds

2) Prepare all journal entries for 2016.

USE THIS EFFECTIVE INTEREST METHOD CHART, THAT CONSIST OF THE FOLLOWING HEADINGS

1- DATE

2- CASH INTEREST

3- INTEREST EXPENSE

4- PREMIUM AMORTIZED

5- UNAMORTIZED PREMIUM

6- BOOK VALUE

PLEASE GIVE CLEAR ANSWERS

Homework Answers

Answer #1
Bond Issue Price = $936,000 + $1,720,500 = 2,656,500
Principal $3,000,000 x 0.312 = $936,000
Interest $150,000 x 11.470 = $1,720,500
Interest amount = $3,000,000 x 10% x 6/12 = $150,000
Date Interest Paid Interest Exp. Prem. Amortization Carrying Amount
01.01.2015 $2,656,500
06.30.2015 $150,000 $132,825 $17,175 $2,639,325
12.31.2015 $150,000 $131,966 $18,034 $2,621,291
06.30.2016 $150,000 $131,065 $18,935 $2,602,356
12.31.2016 $150,000 $130,118 $19,882 $2,582,474
06.30.2016 Bond Interest Exp. $131,065
Bonds Payable $18,935
Cash $150,000
12.31.2016 Bond Interest Exp. $130,118
Bonds Payable $19,882
Cash $150,000
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