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Sawada Insurance Ltd. issues bonds with a face value of $100 million that mature in...

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Accounting

Sawada Insurance Ltd. issues bonds with a face value of $100 million that mature in 12 years. The bonds carry a 7.2% interest rate and are sold at 104.22 to yield 5.5%. They pay interest semi-annually.

Calculate the proceeds on issuance of the bonds, and show the journal entry to record the issuance.

imageWill the carrying value of the liability for these bonds increase over time, or decrease?

imageShow the journal entries to record the first two interest payments on these bonds.

image

Proceeds on issuance of the bonds Account Titles and Explanation Debit Credit

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