Response to the following problem:
Round Corporation was authorized to issue $300,000 of bonds. On January 1, 2015, the corporation issued $150,000 of bonds for $147,000. Details of the bond indenture are as follows:
Date of authorization January 1, 2015
Term 3 years
Interest rate 12%
Interest payment dates Semi-annually on June 30 and December 31
Required:
1. Calculate
a. The amount of interest paid every interest payment date
b. The amount of amortization to be recorded at each interest payment date (use the straight-line method of amortization).
2. Calculate actual interest expense for each six-month period.
3. Prepare the journal entries to record the interest and amortization at June 30, 2015.
4. Prepare a partial balance sheet showing the bond liability and discount on December 31, 2015 and 2016 assuming the bonds will be redeemed on December 31, 2017.