On February 28 2014 ETrade Inc issues 8 #6705

On February 28, 2014, ETrade Inc. issues 8 ½ %, 20-year bonds with a face value of $200,000.
The bonds pay interest on February 28 and August 31. ETrade amortizes bonds by the straight-
line method.Requirements1. If the market interest rate is 7 5?8 % when ETrade issues its
bonds, will the bonds be priced at face value, a premium, or a discount? Explain.2. If the market
interest rate is 9% when ETrade issues its bonds, will the bonds be priced at face value, a
premium, or a discount? Explain.3. Assume that the issue price of the bonds is 97. Journalize
the following bond transactions:a. Issuance of the bonds on February 28, 2014b. Payment of
interest and amortization of the bonds on August 31, 2014c. Accrual of interest and amortization
of the bonds on December 31, 2014d. Payment of interest and amortization of the bonds on
February 28, 20154. Report interest payable and bonds payable as they would appear on the
ETrade balance sheet at December 31, 2014.View Solution:
On February 28 2014 ETrade Inc issues 8

ANSWER
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