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Issuance of a Bond at Face Value

On January 1, 2014, Whitefeather Industries issued 300, $1,000 face value bonds. The bonds have a five-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%.

Required:

1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2014.

2. Explain how the issue price would have been affected if the market rate of interest had been higher than 10%.

3. Prepare the journal entry to record the payment of interest on July 1, 2014.

4. Calculate the amount of interest accrued on December 31, 2014.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91624371

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