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Problem 1: The "Bite the Bullet" Company will do just that if it can't borrow some...

Problem 1:

The "Bite the Bullet" Company will do just that if it can't borrow some money. Therefore, Ms. Klocow, the president, has floated a $5,000,000, 20 year bond. The bond pays 8% interest on a semi-annual basis. The bond was sold for 83 on 1/1/2013. The bond current market rate is 10%. On March 1, 2014, $800,000 worth of the bonds were redeemed at 88 plus accrued interest.

Required:

Journalize the following transctions.

A) The Sale of the bonds on January 1, 2013.

B) The first interest payment and bond amortization of July 1, 2013.

C) The second interest payment and bond amortization on December 31, 2013.

D) The redemption of the bonds on March 1, 2014. Two entries!

Problem 3:

Journalize the above transactions using the effective interest method. Do only the first three entries ( A,B,C).

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