Problem 3 On January 1, 2014, P & P Products purchased the $1,000,000 face value, five-year, 8 percent, bonds of Delta Products, a wholly owned subsidiary of P & P, on the open market for $960,000. The bonds are dated, and were issued by Delta Products, on January 1, 2010. The bonds pay interest semiannually each January 1 and July 1. The effective interest method is used to amortize any premium or discount. The market rate is 10 percent.

Required: Make any necessary entries for Delta Products.

Problem 4 Assume that P & P wants to build a new warehouse. The CFO has stated that the building will cost $1.5 million. She has asked you to determine the dollar amount of bonds that P & P would have to issue to cover this cost, assuming that the bonds would have a stated interest rate of 8 percent, a 10-year term and the market rate is currently 6 percent.