Question
A company is selling a $200,000 bond. This bond is a 5 year bond providing for the payment of the face amount at the end
A company is selling a $200,000 bond. This bond is a 5 year bond providing for the payment of the face amount at the end of the bond term and for the payment of interest annually. Contract rate provided in the bond is 9%. When the company sells the bond, market rate of interest is 6%.
Calculate the current fair market value of the company's $200,000 bind.
What will the journal entry look like on Jan 1 of year 1?
Net book value of the bond after its sale on Jan 1 of Year 1?
At the end of year 5, how much cash will the company pay to a holder of the $200,000 on the retirement of that bond?
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