Question
On January 1, 20x2, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was
On January 1, 20x2, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was 12%. Finch uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year.
Required
- Will these bonds be sold at par, a discount, or a premium? How do you know?
- Will the carrying value (book value) go up or down over the life of the bond? How do you know?
- Will the interest expense go up or down over the life of the bond? How do you know?
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Financial Accounting
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
2nd Edition
9780078110825
