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Unformatted text preview: B. Occurs when a company issues bonds with a contract rate more than the market rate. C. Increases the Bond Payable account. D. Decreases the total bond interest expense. E. Is not allowed in many states to protect creditors. Problem ( 60 points ) SHOW ALL WORK !!!!!! . On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: Par value Ammount Present Value Factor Present Value $300,000 x 0.7441 = $223,230 Interest payments $300,000 x 4% x 8.5302 = $102,362.40 Price Bond $223,230 + $102,362.40 = 325,592.40 3...
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- Spring '09