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    Issue price of bonds and journal entries

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    Minimus sold a 100,000 9% 3 year bond issue due on march 31 year 1 at a price yield to investors 10%. Interest rates are per annum compounded semi-annually. The bond interest is payable each september 30 and march 31, with the first payment due september 30 year 1. Premium or discount is amortized by straight line method. Year end is dec 31

    Calculate the price the bond sold for
    Prepare all year 1 journal entries, plus the journal entry needed march 31 year 2
    show how the bond will be reported on dec 31 year 1

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    https://brainmass.com/economics/bonds/issue-price-bonds-journal-entries-35633

    Solution Preview

    The answers are in the attached file.

    Calculation of Bond Price

    Period 31/03/01 30/09/01 31/03/02 30/09/02 31/03/03 30/09/03 31/03/04
    Interest 4500 4500 4500 4500 4500 4500
    Principal 100000
    Total 4500 4500 4500 4500 4500 104500
    Discount Rate 0.952 0.907 0.864 0.823 0.784 0.746
    Dicounted Cash Flow 4,286 4,082 3,887 ...

    Solution Summary

    The solution explains how to calculate the issue price of bonds when market rate is different from coupon rate and the related journal entries.

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