Problem 1
The New York News Company, on January 1, 2015, issued $4,000,00010-year bonds with a stated (coupon) rate of interest of 8.0%.Interest is payable semi-annually on July 1 and January 1. Thebonds are due January 1,2025. At the time the bonds are sold themarket (effective) rate of interest is 6.0%.
Part A:
Compute the selling price of the bonds and prepare the journalentry recorded by the New York News for January 1, 2015 â the datethe bonds were sold. Please show your work for calculation of thebond price.
Part B:
Assuming the New York News used the straight line method ofamortization for discounts and premiums. Prepare the journal entryto record the payment of interest on July 1, 2015
Part C:
Assuming New York News uses the effective interest method ofamortizing disconnects and premiums and using the same market rateof interest of 6.0 % annually (3.0% for 6 months), please preparethe entry to record the payment of interest on July 1, 2015.