A Company Issued 10%, 5-Year Bonds with a Par Value

question 148

Essay

A company issued 10%, 5-year bonds with a par value of $2,000,000, on January 1. Interest is to be paid semiannually each June 30 and December 31. The bonds were sold at $2,162,290 based on an annual market rate of 8%. 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.
$\begin{array} { l | l | l | l | l | l } \text { Semiannual } & \text { Cash } & \text { Bond } & & & \\\hline \text { Interest } & \text { Interest } & \text { Interest } & \text { Premium } & \text { Unamortized } & \text { Carrying } \\\hline \text { Period } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Premium } & \text { Value } \\\hline & & & & & \\\hline\end{array}$ (2) Prepare the journal entry to record the first semiannual interest payment.

---

Definitions:

Minimum Wage

The lowest legal hourly rate of pay that employers can compensate workers.

Low-skill Workers

Employees possessing minimal technical training or education, often associated with tasks requiring lower levels of cognitive or manual skill.

On-the-job Training

Instruction and training provided to employees at their place of work while they are performing their job duties.

Teenagers

Young individuals typically between the ages of 13 and 19, undergoing the transition from childhood to adulthood.