Urry Power Ltd. issues bonds and receives proceeds of $57,069,000. The bonds mature in 13 years and

Question:

Urry Power Ltd. issues bonds and receives proceeds of $57,069,000. The bonds mature in 13 years and carry a 9% interest rate paid semi-annually. The bonds were issued at a price of 126.82 to yield 6%.

Required

a. Show the journal entry to record the issuance of the bonds.

b. Determine the face value of the bonds and explain why the issuance price of the bonds is not the same as the face value.

c. Show the journal entries to record the first two semi-annual interest payments on these bonds. Ignore year-end accruals of interest.

d. The carrying value of the liability for these bonds equals the original proceeds received by Urry Power. Will the carrying value of the liability increase over time, or decrease? Explain briefly.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...

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