On January 1, 2013, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months?

On January 1, 2013, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par.

 

Explanation:

1.

Semiannual cash interest payment = $2,200,000 × 9% × 1/2 = $99,000

 

3.

(a) Sold bonds at 96 ($2,200,000 × 0.96) = $2,112,000

(b) Sold bonds at 104 ($2,200,000 × 1.04) = $2,288,000

Sylvestor Company issues 10%, five-year bonds, on December 31, 2012, with a par value of $100,000 and semiannual interest payments.

Sylvestor Company issues 10%, five-year bonds, on December 31, 2012, with a par value of $100,000 and semiannual interest payments.

      

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2012		$	7,360		$	92,640
(1)	6/30/2013			6,624			93,376
(2)	12/31/2013			5,888			94,112

    

Use the above bond amortization table and prepare journal entries to record the following.

   

(a)	The issuance of bonds on December 31, 2012.

Explanation:

(b) 

Discount on bonds payable = $7,360 – $6,624 = $736

cash = $100,000 × 10% / 2 = $5,000

 
(c)

Discount on bonds payable = $6,624 – $5,888 = $736

cash = $100,000 × 10% / 2 = $5,000