Georges Inc. is considering issuing bonds to finance the acquisition of a nationwide chain of distributors of

Question:

George’s Inc. is considering issuing bonds to finance the acquisition of a nationwide chain of distributors of George’s products. George’s is contemplating two different types of bonds to raise the required $90 million purchase price. The first is a traditional 10-year, 14% bond with semiannual interest payments. The second is a 10-year, zero-coupon bond.

Assuming the market rate of interest is 14%, compute the face value of the bond issuance and make the journal entries necessary to record the issuance if

(a) A traditional bond is issued and

(b) A zero-coupon bond is issued.

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...