. On January 1, 2020, Dawson Inc. issued bonds with a face value of $400,000 and coupon interest rate of 5%. The bonds pay interest semi-annually on July 1 and January 1. The market rate at January 1, 2020 is 4%. (a) Are the bonds being issued at a premium or a discount? (b) Prepare the journal entry for the issue, assuming the bonds are issued at 101.4. (No explanation required.) (c) Record the entry for the first interest payment at July 1, 2020. (No explanation required
. On January 1, 2020, Dawson Inc. issued bonds with a face value of $400,000 and coupon interest rate of 5%. The bonds pay interest semi-annually on July 1 and January 1. The market rate at January 1, 2020 is 4%. (a) Are the bonds being issued at a premium or a discount? (b) Prepare the journal entry for the issue, assuming the bonds are issued at 101.4. (No explanation required.) (c) Record the entry for the first interest payment at July 1, 2020. (No explanation required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. On January 1, 2020, Dawson Inc. issued bonds with a face value of $400,000 and coupon interest rate of 5%. The bonds pay interest semi-annually on July 1 and January 1. The market rate at January 1, 2020 is 4%.
(a) Are the bonds being issued at a premium or a discount?
(b) Prepare the
(c) Record the entry for the first interest payment at July 1, 2020. (No explanation required.)
Expert Solution
Step 1
To know whether the bond is issued at a premium or discount we need to find out the Price of the bond. The price of a bond will be lower if the market interest rate is higher than the interest rate of the bond and vice versa.
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