Question: Company A issues $ 1,000,000 face value bond with a coupon rate of 4% on January 1, 20X8The market rate at the time of issue

Company A issues $ 1,000,000 face value bond with a coupon rate of 4% on January 1, 20X8The market rate at the time of issue is 5%The bond matures in 4 years and pays interest semi-annually.

What are the proceeds to be received by Company A?

Continuing the example above but at the end of the first year assume the market rate of interest is now 6% (note this is not due to an increase in credit risk for the company)

Prepare the journal entries for the first year using the fair value option

Prepare the journal entries for the first year using the amortized cost method with effective interest method (not straight line)

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