Question

On June 30 of the current year, Rural Gas & Electric Co. issued $50,000,000 face value, 9 percent, 10-year bonds payable, with interest dates of December 31 and June 30. The bonds were issued at a discount, resulting in an effective semiannual interest rate of 5 percent.

Instructions
a. Compute the issue price for the bond that results in an effective semiannual interest rate of 5 percent.
b. Prepare a journal entry to record the issuance of the bonds at the sales price you computed in part a.
c. Explain why the bonds were issued at a discount.



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  • CreatedApril 17, 2014
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