On April 1, 2024, Bight Corporation issued $400,000, five-year bonds. On this date, Shoreline Corporation purchased the bonds from Bight to earn interest. Interest is received semi-annually on April 1 and October 1 and Shoreline’s year end is March 31. Below is a partial amortization schedule for the first three interest periods of the bond issue. 

Instructions 

a. Were the bonds purchased at a discount or at a premium? 

b. What is the face value of the bonds? 

c. What will the bonds’ amortized cost be at the maturity date? 

d. What is the bonds’ contractual interest rate? The market interest rate? 

e. Prepare the journal entries to record the purchase of the bonds; the receipt of interest on October 1, 2024; the accrual of interest on March 31, 2025; and the receipt of interest on April 1, 2025.

Transcribed Image Text:

Semi-Annual Interest Period April 1, 2024 October 1, 2024 April 1, 2025 October 1, 2025 Interest Received $8,000 8,000 8,000 Interest Revenue $6,277 6,251 6,225 Amortization $1,723 1,749 1,775 Bond Amortized Cost $418,444 416,721 414,972 413,197