On January 1, 2018, Technicians Credit Union (TCU) issued 8%, 20-year bonds payable with face value of $900,000. The bonds pay interest on June 30 and December 31.

Requirement 1. If the market interest rate is

7%

when

TCU

issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.

The

8%

bonds issued when the market interest rate is

7%

will be priced at

a discount

a premium

face value

.

They are

attractive

unattractive

in this market, so investors will pay

face value

less than face value

more than face value

to acquire them.

Part 2

Requirement 2. If the market interest rate is

9%

when

TCU

issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.

The

8%

bonds issued when the market interest rate is

9%

will be priced at

a discount

a premium

face value

.

They are

attractive

unattractive

in this market, so investors will pay

face value

less than face value

more than face value

to acquire them.

Part 3

Requirement 3. The issue price of the bonds is

93.

Journalize the bond transactions. (Assume bonds payable are amortized using the straight-line amortization method. Record debits first, then credits. Select explanations on the last line of the journal entry. Round your answers to the nearest whole dollar.)

a. Journalize the issuance of the bonds on January 1,

2018.

Date			Accounts and Explanation	Debit	Credit
2018
Jan. 1

Part 4

b. Journalize the payment of interest and amortization on June 30,

2018.

Date			Accounts and Explanation	Debit	Credit
2018
Jun. 30

Part 5

c. Journalize the payment of interest and amortization on December 31,

2018.

Date			Accounts and Explanation	Debit	Credit
2018
Dec. 31

Part 6

d. Retirement of the bond at maturity on December 31,

2037,

assuming the last interest payment has already been recorded.

Date			Accounts and Explanation	Debit	Credit
2037
Dec. 31