1. ABC, Inc. issued a bond with a par value of $1,000. The bond pays an 8% coupon on December 31^st of each year and matures in 5 years (assume its January 1^st of Year 1).

(a) The market interest rate at the time of issue is 9%. Calculate the issue price of the bond and prepare an amortization schedule for the life of the bond. Show the journal entries for

(i) The issuance of the bond

(ii) The year three interest expense.

(iii) A sale of the bond at the end of year 4 at 103 (i.e. 103% of par).

(b) The market interest rate at the time of issue is 7%. Calculate the issue price of the bond and prepare an amortization schedule for the life of the bond. Show the journal entries for

(i) The issuance of the bond

(ii) The year three interest expense.

(iii) A sale of the bond at the end of year 4 at 103 (i.e. 103% of par).

(c) What is the Bond Discount/Premium balance as of the end of year 3 for (a) and (b) above.