Misan Inc is planning to issue 2 000 000 5 year 6 bonds
Misan Inc. is planning to issue $2,000,000, 5-year, 6% bonds. Interest is payable semiannually each June 30 and December 31. All of the bonds will be sold on July 1, 2014; they mature on June 30, 2019. Misan’s year-end is December 31.
Requirements
1. Compute the issue (sale) price on July 1, 2014, if the yield is:
(a) 6%
(b) 8%
(c) 4%
2. Prepare all journal entries for the above three cases in 2014.
3. Prepare all journal entries for the above three cases in 2015, using the effective interest method.
4. Show how the bond interest expense and the bonds payable, for each case, should be reported on the annual financial statements for 2014 and 2015.
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