The City of Worcester issued $160,000,000, 6.0%, 20-year bonds on 1/1/2021 to fund the construction of the
Question:
The City of Worcester issued $160,000,000, 6.0%, 20-year bonds on 1/1/2021 to fund the construction of the new Polar Park in the downtown area. These bonds pay interest semi-annually on June 30th and December 31st each year. The market interest rate at the time of issuance was 7.0%.
The City Controller has requested your assistance in performing the following requirements:
1. How much money did the City of Worcester receive on 1/1/21 from the issuance of these bonds (i.e., bond valuation)? (3 pts)
2. What is the required journal entry on 1/1/2021 to record the issuance of the Bonds? (2 pts)
3. What are the required journal entries on 6/30/21 and 12/31/21 to record the first 2 semi-annual interest payments?
4. What is the total interest expense recorded over the 20-year life of the bonds?
5. What is the total interest paid over the 20-year life of the bonds?
