From Example 14.7 (Assume we use the Straight Line Method) Example 14A.2: On January 1,2016, the Ruffin Corporation issued $40,000 par value, 4%,four-year bonds that mature on December 31, 2019. Ruffin will pay interest semiannually on June 30 and December 31. The company's fiscal year ends on December 31. What is the issue price of this bond assuming that the market rate of interestis 25? What is the journal entry to record the issuance? Prepare an amortization table using the STRAGHT LINE method. What journal entries are required to record interest 2 expense for the first year? Prepare the journal entry to record the maturity of the bonds. Prepare the t-accounts for the bond payable and bond premium accounts for the life 7 of the bond. 9 Since stated interest rate 4% > market interest rate 2%, we can predict and prove that these bonds will be issued at a premium > Face Value) When we issue the Bonds payable, we promise to pay (1) Cash Interest every semiannual year Face Value of the Bands Payab (2) Principal of $40.000 at the end of the 4th year a stat 14 15 Every period we will pay cash interest 16 Annual Market Interest Rate Semiannual Market Interest Rate 18 Annual Stated interest Rate Semanal stated interest Rate 20 Years Value of the Bonds Payable Present Value of the Bonds Payable Face Valu Valot the ends Payable Annual Stated interest Rate Semiannual Stated interest Rate Number of semiannual periods Face Value of the Bonds Payable Present Value of the Bonds Payable The Bonds payable is issued at a premium Present Value of the Bonds Payable Face Value Premium Totalciniere Prem Amortid Perled SL interest Expense Carrying Value ( P CV Pre m or ) Initial CVPV of the Bands Payable Date Cash Interest 1/1/2016 6/30/2016 2 12/28/2016 5/27/2017 4 12/25/2017 5 /24/2018 12/22/2018 7 6/21/2010 8 12/19/2019 Balance Sheet Presentation Bonds Payable Addre / Carrying Value Face Value