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3 Sep 2018

On January 1, a company issues bonds with a par value of$300,000. The bonds mature in 5 years and pay 8% annual interesteach June 30 and December 31. On the issue date, the market rate ofinterest is 6%. Compute and show how you computed the price of thebonds on their issue date. Record the entry to recognize thesale.

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Trinidad Tremblay
Trinidad TremblayLv2
4 Sep 2018

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Citywide Company issues bonds with a par value of $150,000 ontheir stated issue date. The bonds mature in five years and pay 10%annual interest in semiannual payments. On the issue date, theannual market rate for the bonds is 8%. Compute the price of thebonds as of their issue date.

Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $40,000 par value and an annual contract rate of 10%, and they mature in 10 years.

Required:
For each separate situation, (a) determine the bonds’ issue price on January 1 and (b) prepare the journal
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1. The market rate at the date of issuance is 8%.
2. The market rate at the date of issuance is 10%.
3. The market rate at the date of issuance is 12%.

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Record the bond issue on January 1, 2018, and the first foursemi-annual interest payments on June 30, 2018, December 31, 2018,June 30, 2019, and December 31, 2019.

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