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Unformatted text preview: of 5 perc ent.
a . Compute the is s ue pric e for the bond that res ults in an effec tive s emiannual interes t rate of 5 perc ent.
(Hint: Dis c ount both the interes t pay ments and the maturity value over 20 s emiannual periods .) (Round
your PV fa ctor to 3 de cim a l pla ce s a nd fina l a nsw e r to the ne a re st dolla r a m ount. Om it the "$"
sign in your re sponse .)
Is s uanc e pric e $ 46,889,500 b. Prepare a journal entry to rec ord the is s uanc e of the bonds at the s ales pric e y ou c omputed in part a .
(Round your PV fa ctor to 3 de cim a l pla ce s a nd fina l a nsw e r to the ne a re st dolla r a m ount. Om it
the "$" sign in your re sponse .)
June 30 General Journal
Dis c ount on bonds pay able
Bonds pay able Debit
46,889,500 Credit 3,110,500
50,000,000 c. W hy were the bonds is s ued at a dis c ount?
The bonds were s old at a dis c ount bec aus e the c oupon rate of interes t, 9% , was les s than the mark et
rate of interes t, 10% .
a. Pres ent value of future princ ipal pay ment:
$50,000,000 due after 20 s emiannual periods , dis c ounted at 5% p...
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- Fall '08