Example 14.6: On January 1,2016, the Ruffin Corporation issued $40 000 par value, 4% four-year bonds that mature on December 31, 2019. R n will pay interest quarterly on March 31, June 30, September 30, and December 31. The company's fiscal year ends on December 31. What is the issue price of this bond assuming the market rate of interest is 4%? What is the ournal entry to record the bond issue? What are the ournal entries to record the first year's interest? What entry is made at maturity? Since stated interest rate market interest rate, we can predict and prowe that these bonds will be issued at PAR(Face Value) When we issue the Bonds payable, we promise to pay: (1) Cash Interest every quarter Face Value of the Bonds Payable x Qaurterly stated rate (2) Principal of $40,000 at the end of the 4th year Every Quarter we will pay cash interest Quarterly Market Interest Rate Quarterly Stated Interest Rate Number of Quarters Annual Market interest Rate 4% rv Annual Stated Interest Rate 4% ) Years Face Value of the Bonds Payable The Bonds payable is issued at PAR. No premium or Discount Face Value Present Value of the Bonds Payable Present Value of the Bonds Payable