A. A company issued bonds with a par value of $250,000 and a maturity of 25 years. The bonds pay interest ever six months based on a nominal interest rate of 8% per year. If on the date of issuance of the bonds the market rate (yield) is 7%: a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third six-month period of the bonds. B. Go back to exercise A and assume that the market rate is 9.25%. a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third six-month period of the bonds. C. Assume that the bonds in exercise number A do NOT pay periodic interest. a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third year of the bonds.

A. A company issued bonds with a par value of $250,000 and a maturity of 25 years. The bonds pay interest ever six months based on a nominal interest rate of 8% per year. If on the date of issuance of the bonds the market rate (yield) is 7%: a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third six-month period of the bonds. B. Go back to exercise A and assume that the market rate is 9.25%. a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third six-month period of the bonds. C. Assume that the bonds in exercise number A do NOT pay periodic interest. a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third year of the bonds.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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