Bond prices depend on the market rate of interest, stated rate of interest, and time.
Requirement
1. Determine whether the following bonds payable will be issued at maturity value, at a premium, or at a discount:
(a) The market interest rate is 6%. Boise, Corp., issues bonds payable with a stated rate of 5 3/4%.
(b) Dallas, Inc., issued 8% bonds payable when the market rate was 7 1/4%.
(c) Cleveland Corporation issued 7% bonds when the market interest rate was 7%.
(d) Atlanta Company issued bonds payable that pay stated interest of 7 1/2%. At issuance, the market interest rate was 9 1/4%.