1. On June 30, 2014 Johnson & Sons issued a 5-year $10,000 bond bearing 10% annual interest, paid semi-annually (the market rate is also 10%). What are the various entries on the Income Statement and Balance Sheet for Johnson & Sons for full-year 2014 (year-end is December 31, 2014)? Ignore the impact of taxes.
2. On January 1, 2014, Bills Sock Co issued $100,000 worth of bonds. The bonds carry 12% interest due each January 1, and mature on January 1, 2024. The market rate of interest was 13%.
   1. Would the bonds be issued at par, a discount or a premium? _________________
   2. Why? ____________________________________________________________
   3. What is the bonds cash interest payment every year? ______________________
   4. What is the amount of money that will be repaid in 2024? ___________________
   5. Compute the bonds issuance price using the PV of all the bond payment streams, discounted at ____% rate over _______ years. ____________________________

3. ____________________________________________________________________________________________________________________________________

4. 6. What are the B/S entries for the bond issuance on Jan 1, 2014?
   7. 1. What is the cash interest payment and interest expense for the bond in 2014 using the formulas below?

   8. Cash interest payment = Principal x Coupon rate x Time

      Interest expense = Carrying value Effective rate Time

      Amortization of discount = Interest expense Cash interest payment

      Cash interest payment: _______________________________________________

      Interest expense: ____________________________________________________

      Amortization of discount: ____________________________________________

   9. 2. What are the B/S and I/S entries on Dec 31, 2014? Ignore the impact of taxes.

   10. Balance Sheet

       Income Statement