Company A issued a 5 year, $100,000, 4% bond on Jan. 1, 2010. Interest is payable each December 31. The bond sold for $101,200. The issue costs were $500 the issue costs are merged with any discount or premium to calculate a single effective interest rate 40% of the bonds are retired on January 1, 2013 at 101.

Calculate the effective interest rate; make all needed entries on December 31, 2010, December 31, 2011, January 1, 2013 (retirement) and December 31, 2013, include an amortization table for all years Fair value option- assume the interest rate is 5.5% on December 3, 2010 make all required entries under this option

Answer rating: 100% (QA)

Face value f 100000 Interest i 1000004 4000 Duration of bond n 5 years Bond price p 101200 Issue ... View the full answer