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.



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  • CreatedApril 29, 2014
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