On June 30, 2014, the market interest rate is 3%. Garden Groceries Ltd. issues $1,600,000 of 4%, 15-year bonds. The bonds pay interest on June 30 and December 31. Garden Groceries Ltd. amortizes bond premium by the effective-interest method.
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Using Exhibit 9-7 as a model, prepare a bond amortization table for the term of the bonds.
3. Record the issuance of bonds payable on June 30, 2014; the payment of interest on December 31, 2014; and the payment of interest on June 30, 2015.