Problem regarding the effect of bond issuance

Reference no: EM13953472

Effect of Bond Issuance

A bond with a face value of $10,000 is issued at a discount of $800 on January 1, 2014. The face rate of interest on the bond is 7%.

Required

1. Was the market rate at the time of issuance greater than 7% or less than 7%?

2. If a balance sheet is presented on January 1, 2014, how will the bonds appear on the balance sheet?

3. If a balance sheet is presented on December 31, 2014, will the amount for the bonds be higher or lower than on January 1, 2014?

Reference no: EM13953472

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