A Company Issued 10%,5-Year Bonds with a Par Value of $2,000,000,on

question 119

Essay

A company issued 10%,5-year bonds with a par value of $2,000,000,on January 1,2010.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.
$\begin{array}{|c|c|c|c|c|c|}\hline \text { Semiannual } & \text { Cash Interest } & \text { Bond Interest } & \text { Premium } & \text { Unamortized } & \text { Carrying } \\\text { Interest } & \text { Paid } & \text { Expense } & \text { Amortization } & \text { Premium } & \text { Value } \\\text { Period } & & & &\\\hline\end{array}$
(2)Prepare the general journal entry to record the first semiannual interest payment.

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Definitions:

Dividend Yield

An economic indicator that highlights the yearly amount a company distributes in dividends in comparison to its stock price.

Inventory Turnover

A financial metric that measures the rate at which a company sells and replaces its stock of goods over a period, indicating efficiency in sales and inventory management.

Interest Earned

The income received from investing in interest-bearing financial instruments or accounts.

Net Income

The total profit or loss of a business after all expenses, taxes, and costs have been subtracted from total revenue.