Calculating and recording bonds when stated rate and market rate are different [1 5—20 min]
TVX issued $700,000 of 9%, 10-year bonds payable at a price of 93.779 on March 31, 2010. The market interest rate at the date of issuance was 10%, and the bonds pay interest semiannually.
Requirements
1. How much cash did the company rive upon issuance of the bonds payable?
2. Prepare an effective-interest amortization table fur the bond discount, through the first two interest payments. Use Exhibit 10A-3 as a guide, and round amounts to the nearest dollar.
3. Journalist the issuance of the bonds on March 31, 2010, and on September 30, 2010, payment of the first semiannual interest amount and amortization of the bond discount. Explanations are not required.
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