Questions -
Q1. Newton Company issued $536,000, 7%, 10-year bonds on December 31, 2013, for $493,120. Interest is payable semiannually on June 30 and December 31. Newton Company uses the straight-line method to amortize bond premium or discount.
Prepare the journal entries to record the following.
(a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on June 30, 2014.
(c) The payment of interest and the discount amortization on December 31, 2014.
(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Q2. Styx Corporation is issuing $244,500 of 12%, 5-year bonds when potential bond investors want a return of 14%. Interest is payable semiannually.
Compute the market price (present value) of the bonds.