On January 1 of this year, Nowell Company issued bonds with a face value of $240,000 and a coupon rate of 6.0 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. When the bonds were sold, the annual market rate of interest was 6.0%. 1. What was the issue price on January 1 of this year?
2. What amount of interest expense should be recorded on June 30 and December 31 of this year?
3. What amount of cash is owed to investors on June 30 and December 31 of this year?
4. What is the book value of the bonds on December 31 of this year, December 31 of next year?

1. What was the issue price on January 1 of this year?

since the coupon rate was 6% and the market rate was the same, the bonds will be sold at par, so their issue price = $240,000

2. What amount of interest expense should be recorded on June 30 and December 31 of this year?

interest expense = coupon rate = $7,200 (for both June 30 and December 31)

3. What amount of cash is owed to investors on June 30 and December 31 of this year?

Face value = $240,000

4. What is the book value of the bonds on December 31 of this year, December 31 of next year?

Face value = $240,000

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