Chapter 8
Non-Current Liabilities
396
AP-9A (
4
5
)
A company is issuing $300,000 worth of five-year bonds on January 1, 2016, bearing an
interest rate of 4%, payable annually. Assume that the current market rate of interest is 5%.
Required
a) Will the bond be issued at a discount or at a premium?
b) Calculate the value of the resulting discount or premium.
c) Record the journal entry to reflect the sale of bonds and the appropriate discount or
premium.
Date
Account Title and Explanation
Debit
Credit
