When market interest rates were 6 , three companies issued bonds on January 1, 2015 Each company has a December 31 year end and each company issued bonds with a face value of $100,000 that pay interest annually on December 31 Able Limited sold its bonds at 100 and offered a coupon interest rate of ...

a Able Limited issued at par or 100 with coupon rate 6 2015 Jan 1 Cash 100000 Bonds Payable 100000 b Dec 31 Interest Expense 100000 6 6000 Cash 6000 a ...

When market interest rates were 6%, three companies issued bonds on January 1, 2015. Each company has

Question:

When market interest rates were 6%, three companies issued bonds on January 1, 2015. Each company has a December 31 year end and each company issued bonds with a of $100,000 that pay interest annually on December 31. Able Limited sold its bonds at 100 and offered a interest rate of 6%, while Beta Corp. sold its bonds at 94 and offered a interest rate of 4%. Charles Inc. sold its bonds at 105 and offered a 7% interest rate.
Instructions
(a) Record the issue of the bonds by each company on January 1, 2015.
(b) Prepare the entry that each company would record for the payment of interest on December 31, 2015.
(c) Explain why some of the companies are not recording an interest expense on the bonds that is equal to the interest that was actually paid.
(d) Determine the balance in each company's Bonds Payable account on December 31, 2015.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... 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...