On November 1, 20x1, Bush Company issued 10% bonds with a faceamount of $20...

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Accounting

On November 1, 20x1, Bush Company issued 10% bonds with a faceamount of $20 million. The bonds mature in 10 years. For bonds ofsimilar risk and maturity, the market yield is 12%. Interest ispaid semiannually on April 30 and October 31. Bush is acalendar-year corporation.
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?Required:
(1.) Determine the price of the bonds at November 1,20x1.
(2.) Prepare the journal entry to record the bond issuance byBush on November 1, 20x1.
(3.) Prepare the journal entries (using the effective interestmethod):
a. December 31, 20x1
b. April 30, 20x2
c. October 31, 20x2
?*Assume no reversing entry is recorded on January 1,20x2.
(4.) What would be the journal entry if all bonds are retiredat 103 on May 1, 20x3 right after the third payment.

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3.8 Ratings (526 Votes)

Solution 1 Computation of bond price Table values are based on n 20 i 6 Cash flow Table Value Amount Present Value Par Maturity Value 0311805 2000000000 6236095 Interest Annuity 11469921 100000000 11469921 Price of bonds 17706016 Solution 2 Journal Entries Bush Company Date Particulars Debit Credit 1Nov20X1 Cash Ac Dr See Answer

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In: AccountingOn November 1, 20x1, Bush Company issued 10% bonds with a faceamount of $20 million....On November 1, 20x1, Bush Company issued 10% bonds with a faceamount of $20 million. The bonds mature in 10 years. For bonds ofsimilar risk and maturity, the market yield is 12%. Interest ispaid semiannually on April 30 and October 31. Bush is acalendar-year corporation.??Required:(1.) Determine the price of the bonds at November 1,20x1.(2.) Prepare the journal entry to record the bond issuance byBush on November 1, 20x1.(3.) Prepare the journal entries (using the effective interestmethod):a. December 31, 20x1b. April 30, 20x2c. October 31, 20x2?*Assume no reversing entry is recorded on January 1,20x2.(4.) What would be the journal entry if all bonds are retiredat 103 on May 1, 20x3 right after the third payment.