On June 30, 2011, Wayne, Inc

On June 30, 2011, Wayne, Inc. sold $3,000,000 (face value) of bonds. The bonds are dated June 30, 2011, pay interest semiannually on December 31 and June 30, and will mature on June 30, 2014. The following schedule was prepared by the accountant for 2011.

 Semi-Annual          Interest to           Interest                                        Bond

Interest Period          be Paid           Expense       Amortization       Carrying Value

                                                                                                           $2,925,000

         1                   $120,000           $131,625             $11,625              1,936,625

Instructions

On the basis of the above information, answer the following questions. (Round your answer to the nearest dollar or percent.)

1.   What is the stated interest rate for this bond issue?

2.   What is the market interest rate for this bond issue?

3.   What was the selling price of the bonds as a percentage of the face value?

4.   Prepare the journal entry to record the sale of the bond issue on June 30, 2011.

5.   Prepare the journal entry to record the payment of interest and amortization on December 31, 2011.