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Question - Birmingham Company issues bonds with a par value of $800,000 on the stated issue date. The bonds mature in 10 years and pay 6% annual interest in semiannual payments. On the issue date, the annual market rate for the bond is 8%.
1) What is the amount of each semiannual interest payment for these bonds?
2) How many semiannual interest payments will be made on these bonds over their life?
3) Use the interest rates given to determine whether the bonds are issued at par, at a discount, or at a premium.
4) Compute the price of the bonds as of their issue date.
5) Prepare the journal entry to record the bonds' issuance.
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