On January 1, 2024, Ponasis Corporation issued $2.5-million, 10-year bonds. The bonds pay semi-annual interest on July 1 and January 1, and Ponasis has a December 31 year end. Presented below is a partial amortization schedule.

Instructions 

a. Were the bonds issued at a discount or a premium? 

b. What is the face value of the bonds? 

c. What is the contractual rate of interest? 

d. Fill in the missing amounts for items [1] through [5]. 

e. What was the market interest rate when the bonds were issued? 

f. Record the issue of the bonds on January 1, 2024. 

g. Record the interest payment on July 1, 2024. 

h. Record the accrual of interest on December 31, 2024.

Why would Ponasis’s board of directors not have set the contractual interest rate at the market interest rate on the date of issue when it authorized the bond issue? 

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Semi-Annual Carrying Interest Period Interest Payment Interest Expense Amortization Amount of Bond $ [1] Jan. 1, 2024 July 1, 2024 Jan. 1, 2025 July 1, 2025 Jan. 1, 2026 July 1, 2026 Jan. 1, 2027 $62,500 [3] 62,500 62,500 62,500 62,500 $ [2] 53,920 53,748 53,573 53,394 53,212 $8,412 8,580 8,752 [4] 9,106 9,288 2,695,981 2,687,401 2,678,649 [5] 2,660,616 2,651,328