Prepare journal entries for the following four events (use straight line amortization) 01 01 07 The Def Co issued $100,000, five year bonds, carrying a coupon rate of ten percent (10 ), interest payable annually on December 31 each year The bonds were issued at an effective yield of fourteen percen...

Computation of Journal Entry when issue of share Since the effective yield is higher the bonds are i ...

Prepare journal entries for the following four events (use straight-line amortization). 01/01/07 The Def Co. issued $100,000,

Question:

Prepare journal entries for the following four events (use straight-line amortization).
01/01/07 The Def Co. issued $100,000, five year bonds, carrying a rate of ten percent (10%), interest payable annually on December 31 each year. The bonds were issued at an effective yield of fourteen percent (14%). Assume that the net proceeds from the issue of the bond differed from the of the bond by $10,000.
12/31/07 Recognize the first interest payment.
12/31/08 Recognize the second interest payment.
01/01/09 Redeem (i.e., buy back) twenty percent (20%) of the bonds outstanding for $19,000.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...