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PLEASSE HELPPP!!! EXPLAIN IT TO ME. Assume that on April 1, 2018, Alaska Corp. issues 9 percent, 10-year bonds payable with a maturity value of
PLEASSE HELPPP!!! EXPLAIN IT TO ME.
Assume that on April 1, 2018, Alaska Corp. issues 9 percent, 10-year bonds payable with a maturity value of $100,000. The bonds pay interest on March 31 and September 30, and Alaska amortizes any premium or discount using the straight-line method. Alaska's fiscal year end is December 31. Read the requirements *** Requirement 1. If the market interest rate is 7 percent when Alaska Corp. issues its bonds, will the bonds be priced at par at a premium, or at a discount? Explain. The 9 percent bonds issued when the market interest rate is 7 percent will be priced at a premium They are attractive in this market, so investors will pay more than maturity value to acquire them. Requirement 2. If the market interest rate is 11.5 percent when Alaska Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain They are The 9 percent bonds issued when the market interest rate is 11.5 percent will be priced at a discount unattractive in this market, so investors will pay less than maturity value to acquire them Requirement 3. Assume that the issue price of the bonds is $103,000 Journalize each of the bonds payable transactions. (Do not round any intermediary computations, but then round all amounts you input into the journal entry tables to the nearest whole dollar Record debits first, then credits. Exclude explanations from any journal entries.) a. Issuance of the bonds on April 1, 2018. Accounts Date Apr 1, 2018 Cash 103,000 Premium on bonds payable Bonds payable b. Payment of interest and amortization of premium on September 30, 2018 Journal Entry Date Accounts Debit Sep 30, 2018 Interest expense Premium on bonds payable Cash Journal Entry Debit Credit 3,000 100,000 Credit Requirements 1. If the market interest rate is 7 percent when Alaska Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. 2. If the market interest rate is 11.5 percent when Alaska Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. 3. Assume that the issue price of the bonds is $103,000. Journalize the following bonds payable transactions (round amounts to the nearest dollar) a. Issuance of the bonds on April 1, 2018 b. Payment of interest and amortization of premium on September 30, 2018 c. Accrual of interest and amortization of premium on December 31, 2018 d. Payment of interest and amortization of premium on March 31, 2019 X Step by Step Solution
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