Sawada Insurance Ltd. issues bonds with a face value of $100 million that mature in 12 years.
Question:
Sawada Insurance Ltd. issues bonds with a face value of $100 million that mature in 12 years. The bonds carry a 6% interest rate and are sold at 104.35 to yield 5.5%. They pay interest semi-annually.
Required:
a. Calculate the proceeds on issuance of the bonds, and show the journal entry to record the issuance.
b. Explain why the issuance price of the bonds is not the same as their face value.
c. Will the carrying value of the liability for these bonds increase over time, or decrease? Explain briefly.
d. Show the journal entries to record the first two interest payments on these bonds.
Face ValueFace 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...
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a The proceeds on the issuance of the bonds 100000000 X 10435 104350000 Journal entry for the issuan...View the full answer
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Related Book For 
Understanding Financial Accounting
ISBN: 978-1118849385
1st Canadian Edition
Authors: Christopher Burnley, Robert Hoskin, Maureen Fizzell, Donald
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