Problem 3: Bond Pricing, Interest and Payment (20 points: 4 + 8 + 8)

Howard Inc. issued the following two bonds on January 1, 20Y1:

Bond A: $4,000,000 ten-years note, annual coupon rate 8%, annual market rate 10%

Bond B: $8,000,000 five-years note, annual coupon rate 8%, annual market rate 6%

The bonds pay interest semi-annually.

Required:

1. Calculate the sales price of each bond.
2. Compute the interest expense and interest payment at June 30, 20Y1 and December 31, 20Y1 for each bond?
3. Record the transactions for interest expense, interest payments and amortization of discount/premium (whichever is applicable) for each bond using the Financial Statement Effects Template on June 30, 20Y1 and December 31, 20Y1.

Show your working.