A Company Issued 10%, Five-Year Bonds with a Par Value

question 52

Essay

A company issued 10%, five-year bonds with a par value of $2,000,000, on January 1, 2013. Interest is to be paid semiannually each June 30 and December 31. The bonds were sold at $2,162,290 to yield the buyers an 8% annual return. The company uses the effective interest method of amortization.
(1) Prepare an amortization table for the first two semiannual payment periods using the format shown below.
$\begin{array}{|c|c|c|c|c|c}\hline \begin{array}{c}\text { Semiannual } \\\text { Interest } \\\text { Period }\end{array} & \begin{array}{c}\text { Cash Interest } \\\text { Paid }\end{array} & \begin{array}{c}\text { Bond Interest } \\\text { Expense }\end{array} & \begin{array}{c}\text { Premium } \\\text { Amortization }\end{array} & \begin{array}{c}\text { Unamortized } \\\text { Premium }\end{array} & \begin{array}{c}\text { Carrying } \\\text { Value }\end{array} \\\hline\end{array}$ (2) Prepare the general journal entry to record the first semiannual interest payment.

---

Definitions:

Traumatic Event

An emotionally distressing experience that can lead to lasting psychological and emotional impact, often involving a perceived threat to safety or stability.

Depression

A medical condition characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities.

Hormone Fluctuations

Variations in the levels of hormones in the body, which can affect a wide range of physiological and psychological functions, often cyclic or in response to certain stimuli.

Nolen-Hoeksema

A psychologist known for her work on gender differences in depression and the rumination response style theory.