Question

Bond Price United States Steel Corporation's 7.5% bonds due in 2022 were reported as selling for 104.5. Were the bonds selling at a premium or at a discount? Why is United States Steel able to sell its bonds at this price? The bonds were selling at a discount because the market rate of interest for similar quality bonds was lower than 7.5%
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Answer 1

Solution 1:

The bonds were selling at a premium because the market rate of interest for similar quality bonds was lower than 7.5%.

Solution 2:

Journal Entries - Thomson Co.
Date	Particulars	Debit	Credit
1-May	Cash Dr	$780,000.00
	To Bond Payable		$780,000.00
	(To record issue of bond)
1-Nov	Interest Expense Dr	$42,900.00
	To Cash		$42,900.00
	(To record interest payment)
31-Dec	Interest Expense Dr	$14,300.00
	To Interest payable		$14,300.00
	(To record interest accrued)