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3. ABC company issues the following bonds: Issue date - January 1, 2020 Maturity date - January 1, 2024 Par value -- $50,000

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Answer #1

Requirement:1

Selling price of the Bonds $              53,232

Working:

Present value of interest payments $              19,390
[$50,000*6%*6.46321 PV annuity factor (5%, 4 years, semi annual bond)]
Present value of the face value $              33,842
[$50,000*0.67684 PV ordinary factor (5%, 4 years)]
Selling price of the Bonds $              53,232

Requirement:2

Date Account Titles Debit Credit
July. 1, 2020 Interest Expense [53232*5%] $                2,662
Premium on Bands Payable $                    338
Cash [50000*6%] $             3,000
( To record bonds issue)
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