Question
Maryland Corporation obtained authorization to issue 30-year bonds with a face value of 15 million. The bonds are dated May 1, 2020, and have a
Maryland Corporation obtained authorization to issue 30-year bonds with a face value of 15 million. The bonds are dated May 1, 2020, and have a contract rate of interest of 8 percent. They pay interest on November 1 and May 1. The bonds were issued on July 1, 2020, at 100 plus two months accrued interest.
Instructions: Prepare the necessary journal entries in general journal form on the following.
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(1) August 1, 2020, to record the issuance of the bonds. (5 points)
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(2) November 1, 2020, to record the first semi-annual interest payment on the bond issue. (5 points)
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(3) December 31, 2020, to record interest expense accrued through year-end. (Round to the nearest full number.) (5 points)
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(4) May 1, 2021, to record the second semi-annual interest payment. (Round to the nearest full number.) (5 points)
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(5) What was the prevailing market rate of interest on the date that the bonds were issued? Explain. (5 points)
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