Problem
On January 1st 2013 Bishop company issued 10% bonds dated January 1, 2013 with a face amount of 20 million. The Bonds mature in 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semi-annually on June 30 and December 31.
REQUIRED
1. Determine the price of the bonds at January 1, 2013.
2. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2013.
3. Prepare the journal entry to record interest on June 30, 2013, using the effective interest method.
4. Prepare journal entry to record interest in December 31, 2013, using the effective interest method.