On July 1, 2017, Webhancer Corp. issued $4 million of 10-year, 5% bonds at $4,327,029. This price resulted in a 4% market interest rate on the bonds. The bonds pay semi-annual interest on July 1 and January 1, and Webhancer has a December 31 year end.
Instructions
(a) Record the issue of the bonds on July 1, 2017.
(b) Prepare an effective interest amortization table for the first five interest payments for these bonds. Round amounts to the nearest dollar.
(c) Record the accrual of interestat December 31, 2017, and the subsequent payment on January 1, 2018.
(d) Assuming instead that Webhancer has an August 31 yearend, prepare the adjusting entry related to these bonds on August 31, 2017, as well as the subsequent interest payment on January 1, 2018.
TAKING IT FURTHER
Assuming that the bonds were issued at a market interest rate of 6%, calculate the issue price of the bonds.