Calculate the proceeds on issuance of the bonds » Full Grade
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Question – Sawada Insurance Ltd. issues bonds with a face value of $100 million that mature in 12 years. The bonds carry a 6.9% interest rate and are sold at 112.18 to yield 5.5%. They pay interest semi-annually.
Required –
Calculate the proceeds on issuance of the bonds, and show the journal entry to record the issuance.
Will the carrying value of the liability for these bonds increase over time, or decrease?
Show the journal entries to record the first two interest payments on these bonds. Ignore year-end accruals of interest.
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