P15-3A On March 1, 20X4. Haupstrasse Corp. issues 8 1/4 %. 20-year bonds payable with a face
Question:
P15-3A On March 1, 20X4. Haupstrasse Corp. issues 8 1/4 %. 20-year bonds payable with a face value of $400,000. The bonds pay interest on February 28 and August 31. Haupstrasse amortizes premium and discount by the straight-line method. Required 1. If the market interest rate is 7 3/8 % when Haupstrasse issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. 2. If the market interest rate is 8 7/8 % when Haupstrasse issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. 3. Assume that the issue price of the bonds is 96. Journalize the following bond transac- tions:
a. Issuance of the bonds on March 1, 20X4.
b. Payment of interest and amortization of discount on August 31, 20X4.
c. Accrual of interest and amortization of discount on December 31, 20X4.
d. Payment of interest and amortization of discount on February 28. 20x5. 4. Check your recorded interest expense for the year ended February 28, 20X5. using as a model the supplement to the summary problem on page 588.
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones