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

6- BOOK VALUE

 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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