Universal Foods issued 12% bonds, dated January 1, with a face amount of $180 million on January

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Question:

Universal Foods issued 12% bonds, dated January 1, with a face amount of $180 million on January 1, 2016. The bonds mature on December 31, 2030 (15 years). The market rate of interest for similar issues was 14%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method.

Required:

1. Determine the price of the bonds on January 1, 2016.

2. Prepare the journal entry to record their issuance by Universal Foods on January 1, 2016.

3. Prepare the journal entry to record interest on June 30, 2016.

4. Prepare the journal entry to record interest on December 31, 2023.