ALG company issues bonds dated january 1, 2015 that have a $100,000 par value; m

Question

ALG company issues bonds dated january 1, 2015 that have a $100,000 par value; mature in 2 years, and pay 6% interest semiannually on june 30 and December 31. The bonds mature on December 31, 2016.

1) ALG issues the bonds on January 1, 2015 when the market rate was 10%

-What is the amount of each semi-annual interest payment?

-How many interest payments will be made over the bond's life?

-Compute the price of the bonds on their issue date.

-Prepare the journal entries on: The issue date, the interest payment dates (using straight-line), and the maturity date.

2) ALG issues the bonds on January 1, 2015 when the market rate was 4%

-What is the amount of each semi-annual interest payment

-How many interest payments will be made over the bond's life?

-Compute the price of the bonds on their issue date

-Prepare the journal entries on: The issue date, the interest payment dates (using straight-line), and the maturity date.

3) ALG issues bonds on Janury 1, 2015 when the market rate was 10%

-Prepare the journal entries on: The issue date, the interest payments dates (Using the effective-interest method), and the maturity date.

4) ALG issues the bonds on January 1, 2015 when the market rate was 4%

-Prepare the journal entries on: The issue date, the interest payments dates (Using the effective-interest method), and the maturity date.

Please show work.

Explanation / Answer

ALG company issues bonds dated january 1, 2015 that have a $100,000 par value; m

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