Bringham Company issues bonds with a par value of $530,000 on their stated issue

Question

Bringham Company issues bonds with a par value of $530,000 on their stated issue date. The bonds mature in 5 years and pay 10% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 12%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

1. What is the amount of each semiannual interest payment for these bonds?
2. How many semiannual interest payments will be made on these bonds over their life?
3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium.
4. Compute the price of the bonds as of their issue date.
5. Prepare the journal entry to record the bonds’ issuance.

Req 1 to 3 Req 4 Req 5 What is the amount of each semiannual interest payment for these bonds? How many semiannual interest payments will be made on these bonds over their life? Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium Semiannual Rate Semiannual cash interest payment Par (maturity) value Number of payments Whether the bonds are issued at par, at a discount, or at a premium? Req 1 to 3 Req 4

Explanation / Answer

Answer 1. Semiannual Cash Interest Payment = $530,000 X 5% Semiannual Cash Interest Payment = $26,500 Answer 2. No. of Payments = 5 Years X 2 = 10 Answer 3. Actual Interest Rate (10%)

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