Question: A company issued 7% bonds, dated January 1, with a face amount of $550,000 on January 1, 2015. The bonds mature on December 31, 2018

A company issued 7% bonds, dated January 1, with a face amount of $550,000 on January 1, 2015. The bonds mature on December 31, 2018 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31.

REQUIRED:

1. Determine the price of the bonds at January 1, 2015.

2. Prepare the journal entry to record their issuance by National on January 1, 2015.

3. Prepare the journal entry to record interest on June 30, 2015.

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