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problem: Coley Co. issued 30 million dollar face value of 9%, ten year bonds on June 1, 2009. The bonds pay interest on yearly basis on May 31 each year.

[A] Suppose that the market interest rates were slightly higher than 9 percent when the bonds were sold. Would the proceeds from the bond issue have been less than, more than, or equal to the face value?  describe your answer.

[B] Independent of your answer to part [A], suppose that the proceeds were $29,640,000. Make journal entry to show the effect of issuing the bonds.

[C] Compute the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal yr ended September 30, 2009, suppose that the discount of $360,000 is amortized on a straight line basis.

Basic Finance, Finance

  • Category:- Basic Finance
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