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