On January 1, 2019, Caltech Company issues bonds that have a $4,100,000 par value, mature in...

On January 1, 2019, Caltech Company issues bonds that have a $4,100,000 par value, mature in 15 years, and pay 6% interest semiannually on June 30 and December 31. The bonds are sold at par.

1. How much interest will Caltech pay (in cash) to the bondholders every six months?
2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2019; (b) the first interest payment on June 30, 2019; and (c) the second interest payment on December 31, 2019 (d) the third interest payment on January 1, 2020.
3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 98 and (b) 102.

Solutions

Expert Solution

Answer 1.

Par Value = $4,100,000

Annual Interest Rate = 6.00%
Semiannual Interest Rate = 6.00% / 2
Semiannual Interest Rate = 3.00%

Semiannual Interest Payment = Semiannual Interest Rate * Par Value
Semiannual Interest Payment = 3.00% * $4,100,000
Semiannual Interest Payment = $123,000

Answer 2.

Answer 3.

If bonds are issued at 98:

If bonds are issued at 102:

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Tano Company issues bonds with a par value of $100,000 on January 1, 2019. The bonds’...

Tano Company issues bonds with a par value of $100,000 on January 1, 2019. The bonds’ annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $94,923. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over...

Tano Company issues bonds with a par value of $85,000 on January 1, 2019. The bonds’...

Tano Company issues bonds with a par value of $85,000 on January 1, 2019. The bonds’ annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $80,684. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over...

On January 1, 2017, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in...

On January 1, 2017, 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? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest...

On January 1, Boston Enterprises issues bonds that have a $1,800,000 par value, mature in 20...

On January 1, Boston Enterprises issues bonds that have a $1,800,000 par value, mature in 20 years, and pay 8% interest semiannually on June 30 and December 31. The bonds are sold at par. 1a. How much interest will Boston pay (in cash) to the bondholders every six months? 1b. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31....

On January 1, 2017, Hawkins Industries issues bonds that have a $100,000 par value, mature in...

On January 1, 2017, Hawkins Industries issues bonds that have a $100,000 par value, mature in 10 years, and pay 6% interest semiannually on June 30 and December 31. The bonds were issued at 95. Prepare the journal entry to record the issuance of the bonds on January 1, 2017 Prepare the journal entry to record the first interest payment on June 30, 2017, assuming that the bond discount or premium is amortized using the straight-line method. On January 1,...

On January 1, 2017, Boston Enterprises issues bonds that have a $3,400,000 par value, mature in...

On January 1, 2017, Boston Enterprises issues bonds that have a $3,400,000 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? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest payment...

On January 1, Boston Enterprises issues bonds that have a $1,300,000 par value, mature in 20...

On January 1, Boston Enterprises issues bonds that have a $1,300,000 par value, mature in 20 years, and pay 7% interest semiannually on June 30 and December 31. The bonds are sold at par. 1a. How much interest will Boston pay (in cash) to the bondholders every six months? 1b. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31....

On January 1, Boston Enterprises issues bonds that have a $1,650,000 par value, mature in 20...

On January 1, Boston Enterprises issues bonds that have a $1,650,000 par value, mature in 20 years, and pay 10% 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? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31....

On January 1, 2017, Boston Enterprises issues bonds that have a $1,850,000 par value, mature in...

On January 1, 2017, Boston Enterprises issues bonds that have a $1,850,000 par value, mature in 20 years, and pay 7% 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? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest...

On January 1, 2017, Boston Enterprises issues bonds that have a $1,700,000 par value, mature in...

On January 1, 2017, Boston Enterprises issues bonds that have a $1,700,000 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? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest payment...

Subjects