Chapter 14, Problem P14.34APGA

Analyzing and journalizing bond transactions
Learning Objectives 2, 3,4
3. June 30, 2018, Interest Expense $25,200
On January 1,2018, Nurses Credit Union (NCU) issued 8%, 20-year bonds payable with face value of $600,000. The bonds pay interest on June 30 and December 31.
Requirements

1. If the market interest rate is 7% when NCU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain
2. If the market interest rate is 9% when NCU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain
3. The issue price of the bonds is 92. Journalize the following bond transactions:

a. Issuance of the bonds on January 1,2018.
b Payment of interest and amortization on June 30, 2018.
c. Payment of interest and amortization on December 31, 2018.
d Retirement of the bond at maturity on December 31,2037, assuming the last interest payment has already been recorded.