Assume that the following are independent situations recently reported in the Wall Street Journal. 1. General Electric (GE) 7% bonds, maturing January 28, 2018, were issued at 111.40. 2. Boeing 7% bonds, maturing September 24, 2032, were issued at 98.70. Collapse question part (a) Correct answer. Your answer is correct. Were GE and Boeing bonds issued at a premium or a discount? The General Electric bonds were issued at a Entry field with correct answer and the Boeing bonds were issued at a Entry field with correct answer. Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT Attempts: 2 of 3 used Collapse question part (c) Prepare tabular summaries to record the issue of each of these two bonds, assuming each company issued $740,000 of bonds in total. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)

Respuesta :

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