On January 1, 2016, Bradley Recreational Products issued $200,000, 12%, four-yea

Question

On January 1, 2016, Bradley Recreational Products issued $200,000, 12%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $188,058 to yield an annual return of 14%

Prepare an amortization schedule that determines interest at the effective interest rate.

Prepare an amortization schedule by the straight-line method.

     

Prepare the journal entries to record interest expense on June 30, 2018, by each of the two approaches

Assuming the market rate is still 14%, what price would a second investor pay the first investor on June 30, 2018, for $28,000 of the bonds? what is the price of bonds?

Payment Number Cash Payment Effective Interest Increase in Balance Carrying Value 1 2

Explanation / Answer

Prepare an amortization schedule that determines interest at the effective interest rate

Prepare an amortization schedule by the straight-line method.

Payment Number Cash Payment Effective interest Increase in Balance Carrying Value 1,88,058 1 12,000 13,164 1,164 1,89,222 2 12,000 13,246 1,246 1,90,468

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