Bond prices after issuance
Several years ago, Clear-Air Systems issued $100 million of 30-year, 8% bonds payable at a small premium. Since the bonds were issued, Clear-Air's financial strength and credit rating have actually improved, but today the bonds are trading among investors at a price of 98.
(a) Explain the most probable reason why the market price of these bonds has declined, even though Clear-Air's credit rating has improved.
(b) How will the drop in the market value of these bonds be reported (if at all) in Clear-Air's income statements and statement of financial positions? Explain.

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The Answer of Bond prices after issuance
Several years ago, Clear-Air Systems issued $100 million of 30-year, 8% bonds payable at a small premium. Since the bonds were issued, Clear-Air's financial strength and credit rating have actually improved, but today the bonds are trading among investors at a price of 98.
(a) Explain the most probable reason why the market price of these bonds has declined, even though Clear-Air's credit rating has improved.
(b) How will the drop in the market value of these bonds be reported (if at all) in Clear-Air's income statements and statement of financial positions? Explain.

Bond Prices After Issuance