ABC issues $20M in bonds on January 1, 2004. The bonds mature in 30 years and pay interest at the end of each semi-annual period on July 1 and January 1. The bonds have a coupon rate of 10% and were issued when the market rate of interest is 12%. Bond issue costs of $300,000 were paid in cash.
1. Calculate the proceeds of the bond
2. Prepare an amortization table
3. prepare the journal entries for the first year of the bonds (2004). Also include the journal entry for the second interest payment (on jan 1, 2005).
4. Assume the same facts as above except assume that the bonds are sold on April 30, 2004, four months into the first interest period and they are sold at par. Calculate the proceeds of the bond and prepare the journal entries through the second interest payment. You may omit entries for bond issue costs
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