Faraday Motors Company Ltd. issues bonds that are sold in the market at a price of 113.77

Question:

Faraday Motors Company Ltd. issues bonds that are sold in the market at a price of 113.77 and receives proceeds of $102,393,000 to yield 7.09%. The bonds pay interest semi-annually at 8.5% and mature in 17 years.

Required

a. Show the journal entry to record the issuance of the bonds.

b. What is the face value of the bonds?

c. Are the bonds issued at par or with a discount or premium? Will the carrying value of the liability for these bonds increase over time, or decrease? Explain briefly.

d. Show the journal entries to record the first two interest payments on these bonds. Ignore year-end accruals of interest.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...

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