Assume that on April 1, 2016. Back Trail, Corp, issues 10 percent, 10-year bonds

Question

Assume that on April 1, 2016. Back Trail, Corp, issues 10 percent, 10-year bonds payable with a maturity r 31 ced at par, at a premium, or at a discount? Expian. I n this market, so investors wil pay at par, at a premium, or at a discount? E Do not round any intermediary computations, but then round all arnounts you input into the joumal entry tables to the nearest ket interest rate is 11.5 percent when Back Trail. Corp, issues its bonds, will the bonds be ? Explain 3. Assume that the issue price of the bonds is $1,378,000. Journalze the following bonds payable of the bonds on Apil 1, 2016 of premium on September 30, 2016 c. Accrual of interest and amortization of premium on 31, 2016 r 30, 2016

Explanation / Answer

1. When the market interest rate is 8% then the bond will be issued at a premium and the Issue price is calculated as shown below:

2. When the market interest rate is 11.5% then the bond will be issued at a discount and the Issue price is calculated as shown below:

3. when the bond issue price is $1,378,000 then the journal entries are as prepared below:

Table value are based on: n= 20 i= 8% market interest rate Cash Flow Table Value Amount Present Value Par (maturity value) 0.45639 1,300,000 593,307 Interest (annuity) 13.59033 65,000 883,371 1,476,678

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