Question

On September 1, 2021, Bear Corporation issued $ 1,000,000, 6%, 10-year bonds. Interest is payable annually with the first payment due on September 1, 2022.

Instructions

a) For each of the following market rate assumptions, identify whether Bear would issue the bonds at face value, at a discount, or at a premium:

1.       4%.
2.       8%.

b) Provide the appropriate journal entry on September 1, 2021 to record the issuance of the bonds if the market rate of interest is 4%. Round your answer to the nearest dollar.

c) Assuming Bear has a December 31 year end, prepare the year-end adjusting entry to account for accrued interest on the bonds.

Answer 1