Witco Limited patented and successfully tested a new e-cigarette. To expand its ability to produce and market this new product, Witco needs to raise $400,000. On January 1 2010, Witco issued a 12% $400,000, 5 year bond. The bond pays interest semi-annually on June 30 and December 31. The bonds effective interest rate is 10%. 1) Calculate the proceeds from the sale of the bond & the discount or premium. Give 2 reasons why you think it is discount/premium. Show workings 2) Prepare a bond amortization schedule for the life of the bond 3) Prepare the journal entries to record the following: a) The issuance of the bond on Jan 1 2010 b) The first interest payment c) The retirement of the bond at a $400,000 call price on January 1 2013
Witco Limited patented and successfully tested a new e-cigarette. To expand its ability to produce and market this new product, Witco needs to raise $400,000. On January 1 2010, Witco issued a 12% $400,000, 5 year bond. The bond pays interest semi-annually on June 30 and December 31. The bonds effective interest rate is 10%.
1) Calculate the proceeds from the sale of the bond & the discount or premium.
Give 2 reasons why you think it is discount/premium. Show workings
2) Prepare a bond amortization schedule for the life of the bond
3) Prepare the
a) The issuance of the bond on Jan 1 2010
b) The first interest payment
c) The retirement of the bond at a $400,000 call price on January 1 2013
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