On January 1, 2012, Seward Corporation issues $100,000 face value, 8% semiannual coupon bonds maturing three years from the date of issue. The coupons, dated for June 30 and December 31 of each year, each promise 4% of the face value, 8% total for a year. The firm issues the bonds to yield 10%, compounded semiannually.
a. Compute the initial issue proceeds of these bonds.
b. Construct an amortization schedule, similar to that in Exhibit 11.2, for this bond issue, assuming that Seward Company uses amortized cost measurement based on the historical market interest rate to account for the bonds.
c. Give the journal entries related to these bonds for 2012. Seward uses the calendar year as its reporting period.
d. On January 1, 2014, Seward Corporation reacquires $20,000 face value of these bonds for 102% of face value and retires them. Give the journal entry to record the retirement.