On July 1, 2014, McVay Corporation issued $15 million of 10-year bonds with an 8% stated interest rate. The bonds pay interest semiannually on June 30 and December 31 of each year. The market rate of interest on July 1, 2014, for bonds of this type was 10%. McVay closes its books on December 31.

1. At what price were the bonds issued?
2. Using the effective interest method, prepare an amortization schedule showing interest expense, discount or premium amortization, and bond carrying value for each of the first four semiannual interest payment periods.
3. Prepare journal entries to record the first four semiannual interest payments.
4. How should the bonds be shown on McVay’s December 31, 2014, balance sheet and on us December 31, 2015, balance sheet?

  • CreatedSeptember 10, 2014
  • Files Included
Post your question