Question
For each of the following three conditions, journalize the bond issuance and related first semiannual interest payment. The company uses effective-interest rate for amortizing bond
For each of the following three conditions, journalize the bond issuance and related first semiannual interest payment. The company uses effective-interest rate for amortizing bond premium as well as bond discount.
1. Bonds Payable for 10 years with face value of $86,000 and stated interest rate of 14% paid semiannually. The market rate of interest is 14% at issuance. The present value of the bonds at issuance is $86,000.
2. Same bonds payable as in condition 1, but the market rate is 16%. The present value of the bonds at issuance is $77,594.
3. Same bonds payable as in condition 1, but the market interest rate is 8%. The present value of the bonds at issuance is $121,028.
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