| Journal entires for bonds and computing interest on bonds
I am having a difficult time understanding bonds.
Here is a question that stumps me:
Record the sale of $4 million of 10 year, 6% corporate bonds priced at 104 plus two months accrued interest. If interest payments are semiannual, and the interest expense account was debited for $53,600 when the first payment was made.
Until this point we were using the stated rate and market rate to find the present or future value. Then computing the interest and pricipal. I am not sure how the "priced at 104" plays into the computation. Our book does an awful job of explaining.
The next thing I am confused on is the accured interest. I think I should just multiply the 6 million x 6% x 2/12. However, I am not sure what the $53,600 is. This whole question confuses me. I am not looking for an answer, just a nudge in the right direction.
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