Question
Bonds payable are dated January 1, 2016, and are issued on that date. The face value of the bonds is $200,000, and the face rate
Bonds payable are dated January 1, 2016, and are issued on that date. The face value of the bonds is $200,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%. REQUIRED: 1. What is the bond issuance price? 2. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period? 3. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2016? What amount of interest expense should be reported for the period from July 1 to December 31, 2016?
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