Question

P12-34A (similar to) Question Help On January 1, 2018, Agricultural Credit Union (ACU) issued 7 % , 20-year bonds payable with face value of $800,000. The bonds pay interest on June 30 and Decemb 31 Read the requirements Requirement 1. If the market interest rate is 5 % when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. The 7% bonds issued when the market interest rate is 5 % will be priced at a premium in this market, so investors will pay They are attractive more than face value to acquire them. Requirement 2. If the market interest rate is 8 % when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. They are unattractive in this market, so investors will pay The 7% bonds issued when the market interest rate is 8 % will be priced at a discount less than face value to acquire them. Requirement 3. The issue price of the bonds is 97. Journalize the bond transactions. (Assume bonds payable are amortized using the straight-line amortization method. Record debits first, then credits. Select explanations on the last line of the journal entry Round your answers to the nearest whole dollar) a. Journalize the issuance of the bonds on January 1, 2018. Credit Debit Accounts and Explanation Date 2018 776.000 Cash Jan 1 24.000 Discount on Bonds Payable Choose from any list or enter any number in the input fields and then click Check Answer Check Answer 2 parts remaining Clear All W

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Accounts & Explanation Debit credit Date 2018 Jan. I $ 776,000 24,000 Cash Discount on Bonds Payable Bonds Payable (Issued bonds at a discount) 800,000 (6) 2018 June 30 600 771227111191199999971111111111 Interest Expenses $ 28,600 Discount on Bonds Payable Cash (paid semiannual interest & amortized Discount) 28,000 Calculation & Inteust expense = 8,00,000 X 7%. = 56,000 /9 - $ 28,000 Amostizations of Riscount = 24000/40 = $600