Mindesta Inc. issued bonds on March 1, 2014, with a par value of $300,000. The bonds mature in 15 years and pay 8% annual interest in two semi-annual payments. On the issue date, the annual market rate of interest for the bonds turned out to be 10%.
a. What is the size of the semi-annual interest payment for these bonds?
b. How many semi-annual interest payments will be made on these bonds over their life?
c. Use the information about the interest rates to decide whether the bonds were issued at par, at a discount, or at a premium.
d. Estimate the market value of the bonds as of the date they were issued.
e. Present the journal entry that would be made to record the bonds’ issuance.