Question:

Bryce Company issued 20 bonds payable with a face value of $1,000 each on April 1, Year 1. The market rate of interest for the bond was 8% and the coupon rate of interest was 12%. The bond pays interest semiannually on April 1 and October 1 each year until maturity on April 1, Year 6.

A) What is the issue price of the bonds?

B) What is the journal entry made at the time the bonds are issued?

C) What is the journal entry made at the time of the first interest payment on October 1, Year 1

D) How much cash will be paid out to the owners of the bond during Year 2?

E) What will be the carrying value of the bond on October 1, Year 4, after the interest payment on that date?

F) How much Interest Expense will the firm recognize on October 1, Year 5, for the 6-month period ending on that date?