Company A issued $ 3,000,000 of bonds paying 4% on January 1, 20X6. Transaction costs of
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Company A issued $ 3,000,000 of bonds paying 4% on January 1, 20X6.
• Transaction costs of $ 50,000 were incurred on this date
• The bonds matures in 5 years.
• Interest is paid semi-annually (June 30 and December 31)
• The market rate of interest was 5% at the time of issuance
• Market rate at end of 20X6 is 6%
On December 31, 20X8 Company A repurchased the bonds in the market place when the market interest rate was 5.5%
• For both the amortized cost method and the FV-NI method:
• Prepare the journal entries for 20X6 and for the repurchase on December 31 20X8 (you may assume the market rate at December 31, 20X7 remained at 6%)
Related Book For
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward
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