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    Whitefeather Industries Bond Pricing Record Issuance Calculation

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    On January 1, 2008, Whitefeather Industries issued 300, $1,000 face value bond. 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 on January 1 was 10%.

    Required:

    1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1 2008.

    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, 2008.

    4. Calculate the amount of interest accrued on December 31, 2008.

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    https://brainmass.com/business/accounting/whitefeather-industries-bond-pricing-record-issuance-calculation-221301

    Solution Preview

    1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1 2008.

    Since the interest rate on bonds (10%) is equal to the market rate (10%), the bonds can be sold at the face value of $1,000. The issue price will therefore be $1,000.
    Journal entry:
    Dr. Cash A/c ...

    Solution Summary

    200 words show how to calculate and record issue price of bonds and explain how high market interest rates affect them.

    $2.19