Question - On January 1, 2009, AML company issues bonds maturing in 5 years. The par value of the bonds is $10,000, the annual coupon rate is 4-percent, and the compounding period is semiannually. The market initially prices these bonds using annual market interest rate 6-percent. The market interest rate on June 30, 2010 was 5% and the market interest rate on Dec. 31, 2012 was 8%.
Were the bonds issued at par, a discount or a premium?
Calculate the issue price.
Record journal entry on the date of issuance.
Will the interest expense increase or decrease over the years?
Calculate the interest expense on Jun 30, 2010.
Record journal entry on the interest expense on Jun 30, 2010.