A company issued the following semi-annual bonds: Face amount: $80,000 Couponrate: 8% ...A company issued the...

Free

60.1K

Verified Solution

Question

Accounting

A company issued the following semi-annual bonds:
      Face amount:  $80,000
      Couponrate:     8%
     Yield:                  6%
     Life:                  20 years
a. Compute the selling price of the bonds.
Prepare the journal entry for the issuance of the bonds usingthe selling price from part (a).

c. Prepare the amortization schedule for only the first twointerest periods using the interest
     method.
    CASH                 INTERESTEXPENSE                  AMORTIZATION                       BOOKVALUE
d. Prepare the journal entry to record the first interestpayment on the bonds using the
     schedule completed in part (c).

Answer & Explanation Solved by verified expert

3.7 Ratings (362 Votes)

Solution a:

Computation of bond price
Table values are based on:
n=	40
i=	3.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.30656	$80,000.00	$24,525
Interest (Annuity)	23.11477	$3,200.00	$73,967

Price of bonds			$98,492

Solution b:

Journal Entries
Event	Particulars	Debit	Credit
1	Cash Dr	$98,492.00
	To Bond Payable		$80,000.00
	To Premium on Bond Payable		$18,492.00
	(To record issue of bond at premium)

Solution c:

Bond Amortization Schedule (Partial)
Semiannual Period	Cash Paid	Interest Expense	Premium Amortized	Carrying Amount
Issue date				$98,492
1	$3,200	$2,955	$245	$98,247
2	$3,200	$2,947	$253	$97,994

solution d:

Journal Entries
Event	Particulars	Debit	Credit
1	Interest expense Dr	$2,955.00
	Premium on bond payable Dr	$245.00
	To Cash		$3,200.00
	(To record interest expense and premium amortization)

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In: AccountingA company issued the following semi-annual bonds: Face amount: $80,000 Couponrate: 8% ...A company issued the following semi-annual bonds: Face amount: $80,000 Couponrate: 8% Yield: 6% Life: 20 yearsa. Compute the selling price of the bonds.Prepare the journal entry for the issuance of the bonds usingthe selling price from part (a). c. Prepare the amortization schedule for only the first twointerest periods using the interest method. CASH INTERESTEXPENSE AMORTIZATION BOOKVALUEd. Prepare the journal entry to record the first interestpayment on the bonds using the schedule completed in part (c).