14.9.1

On February 1, 2018, Cromley Motor Products issued 6% bonds,dated February 1, with a face amount of $55 million. The bondsmature on January 31, 2022 (4 years). The market yield for bonds ofsimilar risk and maturity was 8%. Interest is paid semiannually onJuly 31 and January 31. Barnwell Industries acquired $55,000 of thebonds as a long-term investment. The fiscal years of both firms endDecember 31. (FV of $1, PV of $1, FVA of $1 and PVA of $1, FVAD of$1 and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)

Required:

1. Determine the price of the bonds issued on February 1,2018
2. a. Prepare amortization schedules that indicate Cromley’seffective interest expense for each interest period during the termto maturity.

b. Prepare amortization schedules thatindicate Barnwell’s effective interest revenue for each interestpaid during the term to maturity.

3.    Prepare the journalentries to record the issuance of the bonds by Cromly andBarnwell’s    investment on February 1, 2018.

4. Prepare the journal entries by bothfirms to record all subsequent events related to the bonds throughJanuary 31, 2020.

Determine the price of the bondsissued on February 1, 2018. (Enter your answer in wholedollars.)

Price of the bonds=__________________

Prepare amortization schedules thatindicate Cromley’s effective interest expense for each periodduring the term to maturity. (Enter your answers in wholedollars.)

Payment Number	Cash Payment	Effective Interest	Increase in Balance	Outstanding Balance
1
2
3
4
5
6
7
8
Totals