Sky King Company sold $ 9 million of four- year, 8% debentureson July 1, 2007. T

Question

Sky King Company sold $ 9 million of four- year, 8% debentureson July 1, 2007. The bonds sold to yield a real rate of 7%.Interest is paid annually on June 30.

A.     Determine the price of the bonds.

B.     Prepare an amortization schedule forthe bonds.

C.     Using the format presented in thischapter, record the entry to the accounting system that isnecessary to recognize interest on the bonds at June 30, 2008.

D.     Assume the bonds had been sold toyield a real rate of 9%. At what price would they have sold?

Explanation / Answer

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