On January 1, 2018, Professor's Credit Union (PCU) issued 7 %,20-yearbonds payable with face value of $500,000.The bonds pay interest on June 30 and December 31.
Requirement
1. If the market interest rate is 5% when PCU issues it's bonds, will the bonds be priced at face value at a premium, or at a discount? Explain.
2. If the market interest rate is 7% when PCU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.
3. The issue rice of the bonds is 96. Journalize the bond transactions. (Assume bonds payable are amortized using the straight-line amortization method. Record debits first, then credits).
A. Journalize the issues of bonds on January 1, 2018
B. Journalize the payment of interest and amortization on June 30, 2018
C. Journalize the payment of interest and amortization on December 31, 2018
D. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded.
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On January 1, 2018, Professor's Credit Union (PCU) issued 7 %,20-yearbonds payable with face value o...
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