Answer:
1.- cash proceeds 64,500
2.- (A)
cash 2,150,000
bonds payable 2,150,000
to record issuance
2.- (B)
interest expense 64,500
cash 64,500
to record first interest payment
2.- (C)
interest expense 64,500
cash 64,500
to record second interest payment
3.-(A)
Cash 2,085,500
discount on bonds payable 64,500
Bonds Payable 2,150,000
3.-(B)
Cash 2,214,500
Bonds Payable 2,150,000
premium on bonds payable 64,500
Explanation:
1.-
2,150,000 x 6%/2 = 64,500 cash proceeds
the rate must be divide by 2 because it is an annual rate and the payment are semiannually (2 per year)
2.- the bonds were issued at par, so no premium or discount was conceed.
The interest expense will match the cash payment, because there is no premium or discount to amortize.
3.-
(A)
2,150,000 x 97/100 = 2,085,500
face value (2,150,000)
discount 64,500
(B)
2,150,000 x 103/100 = 2,214,500
face value (2,150,000)
premium 64,500
