Question
Q2: On June 30, 2017, Layton, Inc. sold $1,200,000 (face value) of bonds. The bonds are dated June 30, 2017, pay interest semi-annually on December
Q2: On June 30, 2017, Layton, Inc. sold $1,200,000 (face value) of bonds. The bonds are dated June 30, 2017, pay interest semi-annually on December 31 and June 30, and will mature on June 30, 2020. The following schedule was prepared by the accountant for 2017:
Semi-annual Interest Period
Dec 31, 2017
Instructions
Interest to Interest be Paid Expense
$36,000 $45,484
Amortization $9,484
Unamortized Amount $62,906 53,422
Bond Amortized cost $1,137,094 1,146,578
On the basis of the above information, answer the following questions. (Round your answer to the nearest dollar or percent.)
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a) What is the contractual rate of interest for this bond issue? (1 mark)
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b) What is the market rate of interest for this bond issue? (1 mark)
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c) Prepare the journal entry to record the sale of the bond issue on June 30, 2017.
(1 mark)
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d) Prepare the journal entry to record the payment of interest and amortization on December 31, 2017 (2 marks)
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