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Welch Co. sold $100,000 worth of 9% bonds to yield 10% on January 1, 20x2. The bonds mature in three years on December 31, 20x4.
Welch Co. sold $100,000 worth of 9% bonds to yield 10% on January 1, 20x2. The bonds mature in three years on December 31, 20x4. Interest is payable on June 30 and December 31. Required: a. Calculate the purchase price of the bond b. Does the price make sense? Explain. c. How will the value appear in the newspaper? d. Calculate the total interest expense over the life of the bond BEFORE you do all of the journal entries. Show you work. e. Again, before doing the entries, will the interest expense go up or down over the life of the bond? How do you know? f. Record all necessary journal entries over the life of the bond. Using effective interest method. (No explanations needed for each journal.) Face value n= Stated Rate # of Years Effective int. Factors Int. pymts PV of $1 PV of OA Present value of the interest payments Present value of the maturity Price of bond
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