Problem 14-1 Determining the price of bonds; discount andpremium; issuer and investor [LO14-2]
On January 1, 2018, Instaform, Inc., issued 14% bonds with aface amount of $50 million, dated January 1. The bonds mature in2037 (20 years). The market yield for bonds of similar risk andmaturity is 16%. Interest is paid semiannually. (FV of $1, PV of$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Useappropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,2018.
1-b. Prepare the journal entry to record theirissuance by Instaform.
2-a. Assume the market rate was 12%. Determine theprice of the bonds at January 1, 2018.
2-b. Assume the market rate was 12%. Prepare thejournal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased theentire issue in a private placement of the bonds. Using the data inrequirement 2, prepare the journal entry to record the purchase byBroadcourt.
- Required 1
- Required 2
- Required 3
- Required 4
Determine the price of the bonds at January 1, 2018. (Round youranswer to 2 decimal places.)
Prepare the journal entry to record the bond issuance by Bishopon January 1, 2018. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field. Round your answers to 2 decimal places.)
| No | Date | General Journal | Debit | Credit |
|---|
| 1 | January 01, 2018 | | | |
| | | | |
| | | | |
- ecord the interest on June 30, 2018, using the effectiveinterest method.
Note: Enter debits before credits.
|
| | Date | General Journal | Debit | Credit |
|---|
| June 30, 2018 | | | | | | | | | | | | | | | | | | |
|
- Record the interest on December 31, 2018, using the effectiveinterest method.
Note: Enter debits before credits.
|
| | Date | General Journal | Debit | Credit |
|---|
| December 31, 2018 | | | | | | | | | | | | |
|
