Stay Fit for Life Inc

question 10

Essay

Stay Fit for Life Inc.issues three series of $10,000,000 ten-year bonds dated January 1,2015 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.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent and salaries.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces.

Breakeven Volume

The quantity of products sold or services rendered at which total revenues equal total costs, resulting in no net loss or gain.

Sales Revenues

The income earned by a company from its sales of goods or the provision of services before any costs or expenses are deducted.