signed a 25 a nian 25-vear, 12% mortgage payable for the balance. Requirements v

Question

signed a 25 a nian 25-vear, 12% mortgage payable for the balance. Requirements value of $55,000 on January 1, 2018. Ember Company paid $15,000 cash and Dulilding with a market value of $280,000 an lournalize the January 1,2018, purchase. 2. Journalize the first monthly payment of 3,70 nearest dollar.) Jamuay1,2018. Glound to the 43 Determining bond prices Bond prices depend on the market rate of interest, stated rate of interest, and time Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount: S1 The market interest rate is 8%. Idaho issues bonds payable with a stated rate a. Of 7.75%. b. Austin issued 9% bonds payable when the market interest rate was 8.25%. c. Cleveland's Cars issued 10% bonds when the market interest rate was 10%. d. Atlanta's Tourism issued bonds payable that pay the stated interest rate of 8.5 issuance, the market interest rate was 10.25%.

Explanation / Answer

S14-3;

Answers:

a) Idaho should issue the bonds at a discount value as the market rate of interest (8%) is higher than the interest rate stated on the bonds (7.75%).

b) Austin should issue the bonds at a premium value as the market rate of interest (8.25%) is lower than the interest rate stated on the bonds (9%).

c) Cleveland's Cars should issue the bonds at face value as the market rate of interest (10%) is equal to the interest rate stated on the bonds (10%).

d) Atlanta's Tourism should issue the bonds at discount value as the market rate of interest (10.25%) is higher than the interest rate stated on the bonds (8.5%).

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