On January 1, 2009 McDonald Inc. issued $7 million in face value of bonds that mature in

Question:

On January 1, 2009 McDonald Inc. issued $7 million in face value of bonds that mature in 20 years and pay a 8% interest coupon annually on December 31. The market rate of interest for similar bonds at the time of issuance was 9%. If McDonald hadn’t issued these bonds, their 2009 pre-tax accounting income under U.S. GAAP would have been higher by $574,556.

(a) What was the selling price of the bonds? Round answer to nearest dollar.

(b) What was the total amount of bond issue costs paid by McDonald? Round answer to nearest dollar

(c) Recreate the Journal entry to record the Bond Issuance under US GAAP and IFRS. Round to nearest dollar. Good journal entry format is required.

(d) If McDonald had to prepare its financial statements in accordance with IFRS, what would it report as interest expense for 2009? Assume the total issue costs were whatever you came up with in part a) above. Round to the nearest dollar.

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