P$10-9$

$$ L$010-5$

Recording and Reporting Bonds Issued at a Premium $($ AP$10-9)$

Cron Corporation is planning to issue bonds with a face value of $$700\mathrm{.}000$ and a coupon rate of $13$ percent. The bonds mature in flve

years and pay interest semiannually every June $30$ and December $31.$ All of the bonds were sold on January $1$ of this year. Cron uses the

effective$-$interest amortization method. Assume an annual market rate of interest of $12$ percent.

Required:

What was the issue price on January $1$ of this year?

What amount of interest expense should be recorded on June $30$ and December $31$ of this year?

What amount of cash should be paid to investors June $30$ and December $31$ of this year?

What is the book value of the bonds on June $30$ and December $31$ of this year?