On March 1, 2017, sOFTER Corporation issued $100,000 of five-year, 496 bonds. Th

Question

On March 1, 2017, sOFTER Corporation issued $100,000 of five-year, 496 bonds. The bonds pay interest semi- annually on September 1 and March 1. SOFTER's year end is December 31 and it makes adjusting entries annually a. If the bonds were issued at 98, was the market rate of interest higher or lower than 496? (please type b. If the bonds were issued at 98, were the bonds issued at a premium or a discount? (please type either c. If the bonds had been issued at 102 how much would SOFTER have received, in total, from issuing the d. If the bonds had been issued at 102 how much interest would SOFTER pay on September 1, 2017? $ either higher or lower) premium or discount) bonds?

Explanation / Answer

a. if the bonds were issued at 98, market rate of interest higher than 4%. HIGHER

b. if the bond were issued at 98, then bond issued at a discount. Discount

c. If the bond had been issued at 102, Softer have received in total from issuing bonds = 102,000

d. If the bond had been issued at 102, Interest would softer pay on sep.1, 2017 = 100,000*4%*6/12 = 2000

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