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practice prob nonds - 2007 interest payment journal entry...

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© Mikhail Pevzner and George Mason University Bonds’ practice problems On December 1, 2006, MBP issued 50,000 $100 par value bonds that pay interest semi- annually . Bonds mature in 5 years and have a stated annual coupon rate of 12%. Assume that annual market interest rate is: a) 8% b) 12% c) 16% Required: For each interest rate (a)-(c), determine: 1) Were bonds issued at discount or premium? 2) Bond price at issuance 3) Journal entry at issuance date 4) Construct bond amortization table using: a. Straight line premium/discount amortization method b. Effective interest amortization method 5) Using amortization tables in step (4), determine: a. Amount of interest expense for all years b. Amount of amortization of bond discount/premium for all years, if any c. Journal entries for all years 6) Using straight line premium/discount amortization method, what is 2006 and
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Unformatted text preview: 2007 interest payment journal entry, if bonds are issued at: a. 0.75 b. 1.1? 7) On January 1, 2008 ABC issues bonds with face value of $1,000,000 and coupon rate of 10%, paid semiannually. The bonds mature in 30 years. At the time of © Mikhail Pevzner and George Mason University issuance, the annual market yield was 12%. On January 1, 2020, ABC buys bonds back on the open market for $700,000. Determine: a. Whether the bond is issued at discount, par, or premium; b. Original issue price on January 1, 2008 c. The value of bond liability on ABC’s books on January 1, 2020 d. The journal entry ABC books on January 1, 2020 e. The total amount of interest expense over the bond’s maturity period ABC would have paid, had it not retired the bonds...
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