On January 1, 2013, Cool Universe issued 10% bonds dated January 1, 2013, with a face amount of $20 million. The bonds mature in 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2013.
2. Prepare the journal entry to record the bond issuance by Cool on January 1, 2013.
3. Prepare the journal entry to record interest on June 30, 2013, using the straight-line method.
4. Prepare the journal entry to record interest on December 31, 2013, using the straight-line method.

Question

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The Answer of On January 1, 2013, Cool Universe issued 10% bonds dated January 1, 2013, with a face amount of $20 million. The bonds mature in 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2013.
2. Prepare the journal entry to record the bond issuance by Cool on January 1, 2013.
3. Prepare the journal entry to record interest on June 30, 2013, using the straight-line method.
4. Prepare the journal entry to record interest on December 31, 2013, using the straight-line method.

On January 1, 2013, Cool Universe Issued 10% Bonds Dated