Moonlight Bay Company

On August 1, 2013, Moonlight Bay Company issued $2,000,000 in long-term bonds. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 6%. Bond issue costs are $50,000 and are amortized on a straight-line basis on the interest payment dates only. The bonds pay interest semiannually on April 30 and October 31 of each year. The bonds are to be accounted for under the effective-interest method and Moonlight Bay is a calendar year end company. Bonds are callable any time after October 31, 2015 at 101.
Instructions (show your work)
(a) Calculate the issue price of the bonds and record the journal entry for issuance at August 1, 2013.
(b) Construct a bond amortization table for this problem to indicate the amount of interest expense and appropriate amortization at each interest payment date.
(c) Assuming that interest and amortization are recorded each April 30 and October 31, record the journal entry for the first interest payment date (October 31, 2013) and prepare the interest adjusting entry to be made on December 31, 2013.
(d) Provide the following amounts:
i) Total interest expense recognized by Moonlight Bay Company for the calendar year ending December 31, 2013 ______________________________________
ii) The amount of unamortized discount or premium at October 31, 2016
___________________________________________________________
(d) Even though you have constructed the bond amortization table for the full life of the bond, assume now that Moonlight Bay retires ½ (one-half) of the bond issue at October 31, 2016 after interest payment has been made. Record the journal entry for the retirement at October 31, 2016.

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