a. Company XYZ issues 1.000 pieces of 5-year bonds on January 1, 2010. The maturity date of the bonds is January 1, 2015. You are supposed to determine by yourself:

• the par value (face value) of the bonds. (5 points)
• the contractual (stated) interest rate of the bonds. (5 points)
• the market interest rate (Market interest rate must be different (more or less) than the contractual interest rate of the bonds). (5 points)
• the issuing price of the bonds. Mention the issuing rate (e.g. at 104 (104% of defined par value) or at 95 (95% of defined par value)). (5 points)

After determining above requests, you are expected to record:

a.1. the journal entry for issuing on Jan 1, 2010 by considering premium or discount. (20 points)

a.2. the accrual of interest and others (discount or premium) on Dec 31, 2010. (15 points)

a.3. the payment of interest on Jan 1, 2011. (15 points)

b. Company XYZ redeems (buys back) all stocks in the same day of recording the payment of first interest on Jan 1, 2011.

• Determine the redeeming (buy back) price of the bonds. Mention the redeeming rate (e.g. at 103 (103% of defined redeeming price) or at 97 (97% of redeeming price)). (5 points)

b.1. Record the journal entry. (15 points)

c. Presentation quality will be evaluated according with the number 1 to number 5. (10 points)