Sawyer Corporation issued $200,000,000 face value bonds on 1st July, 2013. The bonds are a 20 year issue and carry a coupon (face) rate of 4 percent. The bonds were issued when rates in the open market were 6%. Interest is paid semi-annually.
a. Purpose the entry to record the issuance of the bonds on Sawyer's books.
b. The bond indenture agreement needs that Sawyer deposit money in a bond sinking fund semiannually starting with the first interest payment date of 1st January, 2014 and ending on the last interest payment date. The controller evaluates that the annual rate of interest earned on the investments in the sinking fund will be 6 percent. What amount must be deposited semiannually in order to have sufficient money in the fund to pay off the bonds in 20 years?