Explanation:
a): Were GE and Boeing bonds issued at a premium or a discount?
GE: Premium
Boeing: Discount
(b): Explain how bonds, both paying the same contractual interest rate, could be issued at different prices?
The two bonds prices are different due to the fact that bond price is based on the market rate of interest but not the stated rate of interest.
Therefore the market interest rates must have been different when the two bonds were issued which caused the selling prices to differ
C): Prepare the journal entry to record the issue of each of these two bonds, assuming each company issued $740,000 of bonds in total
1.Cash (111.40% X $740,000) =$824,360
Bonds Payable 740,000
824,360-740,000= 84,360
Premium on Bonds Payable is $84,350
2.Cash (98.70% X $740,000) =730,380
Discount on Bonds Payable $9,620
730,380+9,620= $740,000
Bonds payable is $740,000