(L.OBJ. 5, 6) Analyzing and journalizing bond transactions [30—40 min] On March 1, 2011...

(L.OBJ. 5, 6) Analyzing and journalizing bond transactions [30—40 min]

On March 1, 2011, Technicians Credit Union (TCU) issued 8%, 20-year bonds payable with maturity value of $700,000. The bonds pay interest on February 28 and August 31. TCU amortizes bond premium and discount by the straight-line method.

Requirements

1. If the market interest rate is 6% when TCU issues its bonds, will the bonds be priced at maturity (par) value, at a premium, or at a discount? Explain.

2. If the market Interest rate is 9% when TCU issues its bonds), will the bonds be priced at par, at a premium, or at a discount? Explain.

3. The issue price of the bonds is 98. Journalize the following bond transactions: