Chapter 14, Problem P14AB.37APGA

Determining the present value of bands payable and journalizing using the effective-interest amortization method

Serenity. Inc. is authorized to issue 5%, 10-year bonds payable. On January 1, 2016, when the market interest rate is 8%, the company issues $700,000 of the bonds pay interest semiannually.

Requirements

1. How much cash did the company receive upon issuance of the bonds (Round all numbers to the nearest whole dollar.)
2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round all numbers to the nearest dollar.)
3. Journalize the issuance of the bonds on January 1, 2016, and payment of the f- semiannual interest amount and amortization of the bond on June 30, 2016 Explanations are not required.