On January 1, 2019, Wildcat Company purchased $100,000 of 6% bonds at face value. The market rate of interest was 8% bonds of similar risk and maturity. The Company paid $90,000 for the bonds. The bonds are to be held to maturity. The bonds pay interest semiannually on July 1 and January 1. Required: (1.) Prepare the appropriate journal entry to record the investment in the bonds. (2.) Record the first interest payment at the effective (market) rate.

Part 1

journal entry to record the investment in the bonds.

Debit : Investment in Bonds $90,000

Credit : Cash $90,000

Part 2

journal entry to record the first interest payment at the effective (market) rate.

Debit : Investment in Bonds $7,200

Credit : Interest Income $7,200

Explanation:

The Summary of the Bond is :

FV = $100,000

PMT = ($100,000 x 6%) ÷ 2 = $3,000

I = 8 %

PV = - $90,000

P/YR = 2

N = ?

Using a Financial Calculator, the number of period payments to maturity N is 13.02.

Effective Interest = $90,000 x 8 % = $7,200

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.