Maul Co. prepared a bond issue dated January 1, 20X2. The face value of the bond was $400,000 with an annual coupon rate of interest 10% and maturity date of 5 years. The bond interest is to be paid semiannually on June 30 and Dec 31. The bonds were issued when the prevailing annual market interest rate was 8%.

1. (show your work) How much was the issue price of the bonds January 1, 20X2?
2. Record the journal entry required for the issuance of the bond (be sure to indicate which entries are debit and which are credit)
3. Record the journal entry required for the first interest payment.
4. Record the journal entry required for the second interest payment.
5. What if the bonds are retired early on January 1, 20X3 after the second interest was paid. The cash paid by the company out in the market was 98% of face value. What is the effect on the balance sheet and income statement from this early retirement.
6. Why would this company want to retire the bonds early? Please give 2 specific reasons.

Problem 2 12 points

Note: Please Refer to the following partial present value tables for this problem.
		Table 1
n=5 periods	4%	5%	8%	10%
PV of $1	0.822	0.784	0.681	0.621
PV of annuity of $1	4.452	4.329	3.993	3.791
FV of $1	1.217	1.276	1.469	1.611
FV of annuity of $1	5.416	5.526	5.867	6.105
n=10 periods	4%	5%	8%	10%
PV of $1	0.676	0.614	0.463	0.386
PV of annuity of $1	8.111	7.722	6.710	6.145
FV of $1	1.480	1.629	2.159	2.594
FV of annuity of $1	12.006	12.578	14.487	15.937