Bobblehead Corporation produces and sells basketball jerseys. On July 1, 2008, Bobblehead Corp. issued $16,000,000 of seven-year, 13% bonds at an effective interest rate of 10%. Interest on the bonds is payable semiannually on Dec. 31 and June 30. The fiscal year of the company is the calender year.
Instructions:
1. Journalize the entry to record the amount of the cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on Dec.31,2008 andthe amortization of the bond premium,
using the straight-line method. (Round to the nearest dollar)
b. The interest payment on June 30, 2009, and the amortization of the bond premium, using the straight-
line method. (Round to the nearest dollar)
3. Determine the total interest expense for 2008.
4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? Explain.
File name:
Bobblehead-Corporation-produces-and-sells-basketball-jerseys.doc File type:
application/msword Price:
$6
