Bond Face Value 500,000
Interest rat 6%
Life 5 Years
Interest is paid annually.
1. Calculate the issue price of the bond under the following circumstances.
Market interest rate is 6%
Market interest rate is 7%
Market interest rate is 4%
For the following, assume the market interest rate was 7% when the bond was issued.
2. Record the entry to issue the bond.
3. Record the entry to pay interest for each of the 5 years the bond is outstanding
4. Record the entry to retire the bond.
5. What is the carrying value of the bond at the end of year 3.
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