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    Price and Issuance of Bonds

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    Please help with the following problem.

    Company issues 100, $1,000 face value, 8% (stated rate), and 3-year U.S. corporate bonds on January 1, 2010 when the market rate for similar risk bonds is 10%. Show the calculation of the issue price of the bonds and the JE to record the issuance of the bonds.

    my answer is

    Step 1
    Face value 100000
    Market rate 10%
    Maturity 3 yrs
    Semiannual market rate 0.05
    Periods 6
    PV of Face value $74,621.54

    Step 2
    Face value 100000
    Stated rate 8%
    Semiannual stated rate 4%
    Semiannual interest payment $4,000.00
    Market rate 10%
    Maturity 3
    Semiannual market rate 0.05
    Periods 6
    PV of Face value 20,302.77

    Total PV of bond 94,924.31

    1-Jan-10
    Cash 94,924.31
    Bonds payable 100,000.00
    Premium on bonds payable (5,075.69)

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    https://brainmass.com/business/accounting/price-issuance-bonds-456590

    Solution Preview

    Please see the attached file(s) for the complete tutorial. Thank you for the opportunity to be of assistance and of course, the opportunity to learn as well.
    Anna, ...

    Solution Summary

    This solution helps with accounting problem. It provides calculations for issue price of bonds and the JE to record the issuance of bonds.

    $2.19

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