Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

Exercise 10

On June 30 of the current year, Rural Gas Electric Co.ssued $60,000,000 face value, 9 percent, 10-year bonds payable, with interest dates of December 31 and June 30.he bonds were issued at a discount, resulting in an effective semiannual interest rate of 5 percent.
Instructions
a.ompute the issue price for the bond that results in an effective semiannual interest rate of 5 percent.Hint: Discount both the interest payments and the maturity value over 20 semiannual periods.)
b.repare a journal entry to record the issuance of the bonds at the sales price you computed in part a.
c.xplain why the bonds were issued at a discount.