Billys Hamburgers Inc., issued 5%, 10-year bonds payable at 90 on December 31, 2010. At December 31, 2012, Billy reported the bonds payable as follows:

Long-term debt:

Bonds payable. . . .$400,000

Less: Discount. . . .32,000

$368,000

Requirements

1. Answer the following questions about Billy's bonds payable:

a. What is the maturity value of the bonds?

b. What is the carrying amount of the bonds at December 31, 2012?

c. What is the annual cash interest payment on the bonds?

d. How much interest expense should the company record each year?

2. Record the June 30, 2013, semiannual interest payment and amortization of the discount.

3. What will be the carrying amount of the bonds at December 31, 2013?