Problem:

Bond contract rate = 7% semi-annual

Bond par = $10,000

Bond market rate = 6% semi-annual

Bond life = 10 years

1. Find the selling price of this bond
2. Will it be sold at a discount or premium?
3. Do the journal entry for the issuance
4. Calculate the discount/premium amortization per period (use the straight-line method)
5. Do the entry for the payment of cash interest per period
6. Do the entry for the amortization of the discount/premium per period
7. Find total interest expense per period
8. Show the balance sheet presentation of the bond after two periods have elapsed