Question - On January 1, 2016, Bishop Company issued 10% bonds dated January 1, 2016 with a face amount of $20 Million. Bonds mature in 2025 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest paid semiannually on June 30 and December 31.
1. Determine the price of the bonds at January 1, 2016.
2. Prepare the journal entry to record the bond issuance by Bishop on January 1 2016.
3. Prepare the journal entry to record interest on June 30 2016 using the effective interest method.
4. Prepare the journal entry to record interest on December 31 2016 using the effective interest method.