n = 3 yrs * 2 times per year = 6
semi-annual coupon: $300k * 0.09 / 2 = $13,500
semi-annual discount rate: 0.10 / 2 = 0.05
PV of the coupons (use PV ordinary annuity "PVoa")...
PVoa = PMT [(1 - (1 / (1 + i)^n)) / i]
= 13,500[(1 - (1 / 1.05^6)) / 0.05
= 13,500[(1 - 0.74622) / 0.05]
= 13,500[5.07569]
= $68,521.84
PV of par paid at maturity...
PV = FV / (1 + I) ^ n
= 300,000 / 1.05^6
= $223,864.62
Total price: (add the two together): $292,386.46
Effective interest - first 6 month period: 292,386.46 * 0.05 = 14,619.32
interest received: 13,500
amount to amortize discount: 14, 619.32 - 13,500 = 1,119.32
Begin balance after 1st coupon: 1,119.32 + 292,386.46 = $293,505.78
repeat.
Journalizing is not my forte. See the link for an example of how to do this.
On January 1, 2013, Kelly Corporation acquired bonds with a face value of $300,000 as a held-to-maturity investment. The bonds carry a 9% stated rate of interest, pay interest semiannually on June 30 and December 31, and mature on December 31, 2015.
Assume Kelly's effective annual yield on the bonds is 10%. Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the effective interest method. Round your answers to the nearest dollar.
