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.

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 2 years ago

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