Journalizing bond transactions [20-30 min]
Consider your answers from Requirements 1-3 of Problem
Requirement
1. Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions in Problem. The company amortizes bond premium and discount by the effective-interest method. Explanations are not required.
Calculating the value of bonds when stated rate and market rate are different [40-50 min]
Interest rates determine the present value of future amounts.
Requirements
1. Determine the present value of seven-year bonds payable with maturity value of $91,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance.
2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.
3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.
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