Problem:
On January 1, 2014, DeLuca Company issued 5-year bonds in the amou,nt of $90,000. The bonds have a stated annual rate of interest of 10%, compounded semiannually. The market rate on January 1 for similar bonds was 12%. The bonds pay interest on June 30 and December 31 of each of the five years.
Required:
Question 1: Compute the interest payments on these bonds.
Question 2: Compute the selling price of these bonds.
Question 3: Determine whether the bonds sold at a discount or a premium.
Question 4: Determine the total interest expense on these bonds.
Question 5: Compute interest expense for the first six months of 2012.
Question 6: Compute the selling price of these same bonds if the market rate had been 8%.
Note: Provide support for rationale.