Question
Richter Corporation sold $1,000,000 face value of bonds at 104 on January 1, 2014. These bonds have a 7% stated rate and mature in 4
Richter Corporation sold $1,000,000 face value of bonds at 104 on January 1, 2014. These bonds have a 7% stated rate and mature in 4 years. Interest is payable on June 30 and December 31 of each year.
1.Prepare the journal entry at issuance on January 1, 2014.
2.Prepare the journal entry to record the first interest payment on June 30, 2014.
3.Calculate the carrying value of the bond on Dec. 31, 2014, after the first two interest payments.
4. Prepare the journal entry at maturity, assuming all interest has been recorded.
5.What is the total cost of borrowing (total interest expense)?
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