A company is issuing $330,000 worth of 4-year bonds on April 5, 2023, bearing an interest rate
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Question:
A company is issuing $330,000 worth of 4-year bonds on April 5, 2023, bearing an interest rate of 4%, payable annually. Assume that the current market rate of interest is 3%.
a) Will the bonds be issued at a discount or at a premium?
b) Calculate the value of the resulting discount or premium.
c) Record the journal entry to reflect the sale of bonds and the appropriate discount or premium.
Note that the present value factor for the principal is 0.8885 (3%, 4-years) and that the present value factor for the recurring interest payment is 3.7171 (3%, 4-years).
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
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