Reference no: EM132629205
On June 30, 2021, Gorgeous Inc. sold $1,200,000 (face value) of bonds. The bonds are dated June 30, 2021, pay interest semi-annually on December 31 and June 30, and will mature on June 30, 2024.
The following schedule was prepared by the accountant for 2021:
Semi-annual Interest to be paid Interest expense Amortization
Unamortized amount Bond Amortized
Interest period cost
June 30,2021 $62,906 $1,137,094
December 31,2021 $36,000 $45,484 $9,484 53,422 1,146,578
Problem 1: What is the contractual rate of interest for this bond issue?
Problem 2: What is the market rate of interest for this bond issue?
Problem 3: What was the selling price of the bonds as a percentage of the face value?
Problem 4: Also need to do the journal entry to record the sale of the bond issue on June 30, 2021.
Problem 5: As well the journal entry to record the payment of interest and amortization on December 31, 2021.
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