PROBLEM - Alberto Co. issues 8%, 10-year bonds with a par value of $350,000 and semi-annual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 and 1/2. The straight line methos is used to allocate interest expense.
Questions:
1. What are the issuer's cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What is the amount of bond interest expense recorded on the first interest payment date?
PROBLEM - Kemper Co. plans to issue 6% bonds on January 1st, 2011, with a par value of $1,000,000. The company sells $900,000 of the bonds on January 1st, 2011. The remaining 100,000 sells at par value on March 1st, 2011. The bonds pay interest semi-annually as of June 30th and December 31st. Record the entry for the March 1st cash sale of bonds.