I have an assignment that I have to do that I am not understanding.
Stowers Research issues bonds dated January 1, 2005, that pay interest semiannually on June 30 and December 31. The bonds have a $20,000 par value, an annual contract rate of 10%, and mature in 10 years.
Required
For each of the following three separate situations, (a) determine the bonds’ issue price on January 1, 2005, and (b) prepare the journal entry to record their issuance.
1. Market rate at the date of issuance is 8%.
2. Market rate at the date of issuance is 10%.
3. Market rate at the date of issuance is 12%.
The market rate is what is throwing me off. Does the 8% mean there is a discount, the 10% means a par sale, and the 12% means it is issued at premium. Please help the assignment is due tonight.
2007-03-23
07:11:14
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3 answers
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asked by
klickie
2