Question

When the market rate is 12%, a company issues %50,000 of 9%, 10-year bonds dated January 1,2017, that mature on December 31,2026, and pay interest semiannually. When bonds mature, the issuer records its payment of principal with a debit to Bonds Payablein the amount of $50,000.

Answer 1

Answer:

Issuance:

Cash                     41,397.56 debit

Discount on BP    8,602.44 debit

     Bonds Payable     50,000 credit

TRUE. At maturity the Bonds payable account will be debited to indicate the bonds were payed.

Explanation:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

C 2,250.000

time 20

rate 0.06

$2250 \times \frac{1-(1+0.06)^{-20} }{0.06} = PV$

PV $25,807.3227

$\frac{Maturity}{(1 + rate)^{time} } = PV$  

Maturity   50,000.00

time   20.00

rate  0.06

$\frac{50000}{(1 + 0.06)^{20} } = PV$  

PV   15,590.24

PV c $ 25,807.3227

PV m $ 15,590.2363

Total $ 41,397.5591