Reference no: EM132976642

A company received $700 in proceeds for issuing a bond. The bond has neither a coupon nor FV ("face value"); rather, the bond consists of only a stream of future cash flows/payments (i.e., CF1, CF2, CF3, etc.) The interest expenses related to the bond for the company were as follows: $300 in the first year, $130 in the second year, and $130 in the third year.

Problem 1) Per the provided interest expenses and issuing value above, please provide the bond's market yield at the time of issuance and then state the value of the respective CF payments ("pmts.") for year 1, 2, and 3 (e.g., pmts. for CF1, CF2, and CF3).

Problem 2) Next, please state the accounting journal entry as though the company retired (i.e., purchased) the bond on Jan. 1 of the third year for $600 (only journal entry for retirement/purchase, no additional calculations on yield or pmts. are required).