Assume that on March 1 , 201 2, Yukon, C orp., issued 9% , 1 0-year bonds
Question:
Assume that on March 1 , 201 2, Yukon, C orp., issued 9% , 1 0-year bonds payable with maturity value of $700,000. The bonds pay interest on February 28 and August 31 , and Yukon amortizes any premium or discount by the straight-line method. Yukon’s fiscal year-end is September 30.
Requirements
1. If the market interest rate is 7.5% when Yukon, C orp., issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain.
2. If the market interest rate is 1 0% when Yukon, C orp., issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain.
3. Assume that the issue price of the bonds is $709,000. Journalize the following bonds payable transactions:
a. Issuance of the bonds on March 1 , 201 2.
b. Payment of interest and amortization of premium on August 31 , 201 2.
c. Accrual of interest and amortization of premium on September 30, 201 2.
d. Payment of interest and amortization of premium on February 28, 201 3.
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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