Response to the following problem:
Wheaton Wholesalers Ltd. was authorized to issue $500,000 of face value bonds, as follows:
Date of authorization January 1, 2017
Term 3 years
Interest rate 12%
Interest payment dates Semi-annually on June 30 and December 31
On January 1, 2015, the corporation issued $200,000 of face value bonds for $210,152.
a. The amount of interest paid every interest payment date.
b. The amount of amortization to be recorded at each interest payment date (use the straight-line method of amortization).
2. Prepare an amortization table showing beginning and ending bond carrying amounts over the three years.
3. Calculate the actual interest rate under the straight-line method of amortization for each six-month period.
4. Comment on the interest rate that results in each period. Do you think that this should vary from period to period? Why or why not?