Question - On January 1, 2010, the Qua Company issued $200,000 bonds with an 8% stated interest rate. Each $1,000 bonds pay interest on June 30 and December 31. The bonds are due on December 31, 2019.
REQUIRED QUESTIONS:
a. Assume the bonds were sold for $175,075.58 to yield 10%. Prepare a bond premium amoritization schedule for the first year of the bond life using the effective interest method. Round all calculations to the nearest dollar.
b. Prepare the journal entry for paying the interest on December 31, 2010.
c. Why did these bonds originally sell at a discount?