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A company issues a bond with a face value of $300,000. It has a coupon rate of interest of 5.0% and term of eight (8)
- A company issues a bond with a face value of $300,000. It has a coupon rate of interest of 5.0% and term of eight (8) years. For each of the three scenarios, answer the following questions:
- What is the market value of the bond (e.g., how much will the company received from the lender when is issues the bond)?
- Is this bond issued at face value, at a premium, or at a discount?
- What is the annual interest expense to be recorded for this bond?
- Make the journal entry to record the issuing of the bond.
- Make the journal entry to record an interest payment.
- Make the journal entry to record the payoff of the bond at the end of its term.
- Scenarios:
- The market rate for the bond is 7.0%
- The market rate for the bond is 5.0%
- The market rate for the bond is 3.0%
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