On January 2,20x5,McGowan Corporation issued 20-year bonds payable with a face value of $300,000 and a face interest rate of 8 percent.The bonds were issued to yield a market interest rate of 9 percent.Interest is payable annually on January 2.In calculating the present value of the bond issue of January 2,20x5,the

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The market interest rate (9 percent) is used to calculate both the present value of the face amount and the present value of the periodic interest payments because it reflects the current market conditions and the return required by investors.

On January 2,20x5,McGowan Corporation Issued 20-Year Bonds Payable with a Face