Datil, Inc. issued $100,000 of 10-year, 6% bonds payable on January 1. Datil, Inc. pays interest each

Question:

Datil, Inc. issued $100,000 of 10-year, 6% bonds payable on January 1. Datil, Inc. pays interest each January 1 and July 1 and amortizes any discount or premium by the straight line method. Datil, Inc. can issue its bonds payable under various conditions: a. Issuance at par value
b. Issuance at a price of $90,000 when the market rate was 7%

c. Issuance at a price of $105,000 when the market rate was 5.5% Requirements

1. Journalize Datil’s issuance of the bonds and first semiannual interest payment for each situation. Explanations are not required.

2. Which condition results in the most interest expense for Datil, Inc.? Explain in detail.

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...