Stay Fit for Life Inc. issues three series of $10,000,000 ten-year bonds dated January 1,2020 on the issue date. Interest is payable on June 30 and December 31 each year. Series A has a coupon rate of 7%; series B is 8%; and series C is 11 %. The market rate of interest at time of issue is 8%.
Required:
a. Prior to making any numerical calculations, comment on whether:
i. Series A will sell at a discount, par, or premium and briefly explain why.
ii. Series B will sell at a discount, par, or premium and briefly explain why.
iii. Series C will sell at a discount, par, or premium and briefly explain why.
b. Prepare journal entries to record the issuance of:
i. The series A bonds.
ii. The series B bonds.
iii. The series C bonds.

Question

Quizplus · Accepted Answer

The Answer of Stay Fit for Life Inc. issues three series of $10,000,000 ten-year bonds dated January 1,2020 on the issue date. Interest is payable on June 30 and December 31 each year. Series A has a coupon rate of 7%; series B is 8%; and series C is 11 %. The market rate of interest at time of issue is 8%.
Required:
a. Prior to making any numerical calculations, comment on whether:
i. Series A will sell at a discount, par, or premium and briefly explain why.
ii. Series B will sell at a discount, par, or premium and briefly explain why.
iii. Series C will sell at a discount, par, or premium and briefly explain why.
b. Prepare journal entries to record the issuance of:
i. The series A bonds.
ii. The series B bonds.
iii. The series C bonds.