Contract rate and market rate of interest

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Atlantis Inc. produces and sells voltage regulators. On July 1, 2007, Atlantis Inc. issued $800,000 of 10-year, 14% bonds at an effective interest rate of 13%. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. 1. Journalize the entry to record the amount of the cash proceeds from the sale of the bonds. 2. Journalize the entries to record the following: a. The first semiannyal interest payment on December 31, 2007. Including the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar). b. The interest payment on June 30, 2008, and the amortization of the bond premium, using the straightline=line method (round to the nearest dollar.)3. determine the toatal interest expense for 2007. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? Explain.

Reference no: EM13160292

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