ABC corp. issued a 3 and a half year, 4%, $100,000 of par value bonds on January 1, 2016.

The 3-year treasury bond interest rate is 3.25%.

The 4-year treasury bond interest rate is 3%

Additional information: 3-year Interest rates for the following:

1 -AAA bonds. 3.75%

2-AA bonds. 4%

3-A bonds 4.25%

Additional information: 4-year Interest rates for the following:

1 -AAA bonds. 3.50%

2-AA bonds. 3.55%

3-A bonds 3.90%

ABC was rated as AAA last year but has since been downgrades to an A rated bond this year.

Question 1- Give 2 reasons why ABCs bond rating fell during the year?

Question 2 -What is the market rate of the 3 1/2-year ABC bond? Explain and show all work and calculations.

Question 3-Present the journal entry for the issuance of the bonds on January 1, 2016. Shown your work as to how the value of the bonds was calculated

Question 4. Show a partial balance sheet on 12/31/2016 relating to this bond issue

Question 5. Show the income statement effects for calendar year 2017 for this bond issue

Question 6. Show the cash flow statement effects of this bond issue for calendar years 2019 and 2018.