The answers are:
- Book Value of the Bond on December 31 this year = $140,000
- Book Value of the Bond on December 31 next year = $140,000
Calculation of the amount of interest expense should be recorded on June 30 and December 31 of this year
Semiannual Interest Rate = Annual Coupon Rate / 2 = 7.5% / 2 = 3.75%
Amount of Semiannual Interest Rate = $140,000 x 3.75% = $5,250
The interest expense should be recorded on June 30 and December 31 of this year is $5,250
The amount of cash is owed to investors on June 30 and December 31 of this year
In this question, cash owed to the investor is the same as the amount paid as interest, so
cash owed to the investor on June 30 = $5,250
Dec 31 = $5,250
Calculation of book value of the bonds on December 31 of this year and December 31 of next year
Book Value as of Year-End = Face Value + Unamortized Premium
Or
= Face Value - Unamortized Discount
Book Value of the Bond on December 31 this year = $140,000
Book Value of the Bond on December 31 next year = $140,000.
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