Question: On January 1, 2008, the Junco Company issued $500,000 face amount ten (10) year, 10 percent stated rate bond when the market interest rates were 11 percent. The bonds pay interest semiannually each June 30th and December 31st & mature on December 31, 2018.
Required:
[A] Determine the effective interest rate?
[B] Using the present value tables contained on the following pages, compute the proceeds [issue price] of the Junco Company's bonds on January 1, 2008 suppose that the bonds were sold to provide a market rate of return to the investor.
[C] What will be the cash interest payment made on June 30th, 2008
[D] Apply the effect interest rate method; estimate the interest that will be recognized on the income statement on June 30th, 2008.
[E] What will be the new carrying price for the bond on June 30th, 2008?