Answer:
Required 1
Cash $323,440 (debit)
Bonds Payable $323,440 (credit)
Required 2
Interest Expense $12,938 (debit)
Bond Payable $12,938 (credit)
Required 3
J1
Interest Expense $12,961 (debit)
Bond Payable $12,961 (credit)
<em>Interest accrued on Bond</em>
J2
Bond Payable $12,938 (debit)
Cash $12,938 (credit)
<em>Interest Cash outflow</em>
Required 4
J1
Interest Expense $12,961 (debit)
Bond Payable $12,961 (credit)
<em>Interest accrued on Bond</em>
J2
Bond Payable $12,938 (debit)
Cash $12,938 (credit)
<em>Interest Cash outflow</em>
Explanation:
First, determine the coupon payments as follows :
FV = ($270,000)
PV = $323,440
N = 20
P/yr = 1
I = 8%
PMT = ?
Using a Financial Calculator, the annual coupon payments will be $27,042 ($12,938 semi-annually).
July 31,2018
<u>Effective Interest Calculation</u>
Effective Interest = $323,440 × 8% × 1/2
= $12,938