Question: Hard Top Patios issued 225 000 worth of five year bonds with

Hard Top Patios issued $225,000 worth of five-year bonds with a stated interest rate of 9.5% and interest payable annually on December 31. The bonds were issued at 95. The bonds were issued on January 1, 2012. The fiscal year end is December 31.

1. Was the market interest rate at the time of issue higher or lower than 9.5%? Explain.
2. Will the interest payment be more or less than the interest expense each year?
3. Will the carrying value be more or less than $225,000 after three years? After four years? At maturity?

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  • CreatedSeptember 01, 2014
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