Please solve P12-5

year period. Required: a. Explain what factors would cause the bonds to sell at a discount. b. Prepare the entry that O'Brien made to record the sale of the bonds. Beginning Interest To Balance Expense Discount P12-4 O'Brien Corporation issued $100,000, face-value, 8% coupon, 10-year bonds on January ing price was $87,538. Assume that the market rate of interest stays at 10% over the 10- 1, 2001. The bonds pay interest semiannually and were sold to yield 10%. The final sell Show how the bonds would be presented on O'Brien's balance sheet at December 31 c. Coupon Payment Amortization From 1/1/01 6/30/01 7/1/01 12/31/01 1/1/02 6/30/02 7/1/02 12/31/02 1/1/03 6/30/03 7/1/03 12/31/03 1/1/04 6/30/04 7/1/04 12/31/04 1/1/05 6/30/05 7/1/05 12/31/05 1/1/06 6/30/06 7/1/06 12/31/06 1/1/07 6/30/07 7/1/07 12/31/07 1/1/08 6/30/08 7/1/08 12/31/08 1/1/09 6/30/09 7/1/09 12/31/09 1/1/10 6/30/10 7/1/10 12/31/10 d. Prepare the entry to record the first interest payment on June 30, 2001. e. 2001. f. What is the economic value of the bonds on December 31, 2001? g. What should the liability value and the economic value of the bonds be on January 1, 2011, the maturity date of the bonds? Explain. h. Prepare the entry to record the retirement of the bonds on January 1, 2011. P12-5 Refer to P12-4. Assume that on June 30, 2009, market interest rates soared to 12%. Required: a. Compute the economic value of the bonds on June 30, 2009. b. Comment on any accounting adjustments required by O'Brien Corporation because of the change in market interest rates. c. What entry would be made by O'Brien if it retired the bonds on June 30, 2009, by purchasing the bonds in the open market? d. Explain why the action taken in part (c) may not be in the best interests of O'Brien's stockholders