On January 1, 2010, Discovered Inc., issued $13 million face amount of 20-year, 18% stated rate bonds when market interest rates were 20%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2029.
a) Using the present value tables (Table 6-4 and Table 6-5), calculate the proceeds (issue price) of Discovered Inc.'s, bonds on January 1, 2010, assuming that the bonds were sold to provide a market rate of return to the investor. (Round pv factor to 4 decimal places and the final answer to the nearest dollar amount.
Proceeds $
c) Assume instead that the proceeds were $13,459,000. Record the journal entry to show the payment of semiannual interest and the related premium amortization on June 30, 2010, assuming that the premium of $459,000 is amortized on a straight-line basis.
- General Journal...................................Debit..................Credit
- Interest expense.................................$
- Premium on bonds payable...................$
- Discount of bonds payable...............................................$