Analyzing and journalizing bond transaction

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Reference no: EM131208481

On January 1, 2014, Merchandise Credit Union (MCU) issued 7%, 20- year bonds payable with face value of $300,000. The bonds pay interest on June 30 and December 31.

Requirements

1. If the market interest is 6% when MCU issues its bonds, will the binds the priced at face value, at a premium, or at a discount? Explain.

2. If the market interest is rate 8% when MCU issues its bonds, will the bonds be priced at a face value, at a premium or at a discount? Explain.

3. The issues price of the bonds is 95. Journalize the following bond transactions:

a. Issuance of bonds January 1, 2014.

b. Payment of interest and amortization June 30, 2014

c. Payment of interest and amortization December 31, 2014.

d. Retirement of the bond at a maturity on December 31, 2014

Reference no: EM131208481

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