Question: On January 1, 2011, Bishop Company issued 10% bonds dated January 1, 2011, with a face amount of $20 million. The bonds mature in 2020

On January 1, 2011, Bishop Company issued 10% bonds dated January 1, 2011, with a face amount of $20 million. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.

Required:

1. Determine the price of the bonds at January 1, 2011.

2. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2011

3. Prepare an amortization schedule under the effective interest method for the first two years of the bond’s life.

4. Prepare the journal entry to record interest on June 30, 2011, using the effective interest method

5. Prepare the journal entry to record interest on December 31, 2011, using the effective interest method

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1 Determine the price of the bonds at January 1 2011 a Interest 1000000 Principal 20000000 Rate 6 Maturity 20 years Price 17706016 Hence the Bond Pric... View full answer

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