On July 1, 2011, Global Satellites issued $1.5 million of 10-year, 7% bonds to yield a market interest rate of 6%. The bonds pay semi-annual interest on July 1 and January 1. Global has a December 31 year end.
Instructions
(a) Calculate the bonds’ present value (issue price) on July 1.
(b) Prepare an amortization table through January 1, 2013 (three interest periods) for this bond issue. Round all amounts to the nearest dollar.
(c) Record the issue of the bonds on July 1.
(d) Prepare the adjusting entry on December 31, 2012, to accrue the interest on the bonds.
(e) Show the statement of financial position presentation of the liabilities at December 31, 2012.
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