Question

10-1a

Hartford Research issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds have a $34,000 par value and an annual contract rate of 8%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.)

Required:

Consider each of the following three separate situations.

1. The market rate at the date of issuance is 6%.
(a) Complete the below table to determine the bonds' issue price on January 1, 2017.
(b) Prepare the journal entry to record their issuance.
2. The market rate at the date of issuance is 8%.
(a) Complete the below table to determine the bonds' issue price on January 1, 2017.
(b) Prepare the journal entry to record their issuance.
3. The market rate at the date of issuance is 10%.
(a) Complete the below table to determine the bonds' issue price on January 1, 2017.
(b) Prepare the journal entry to record their issuance.

Complete the below table to determine the bonds' issue price on January 1, 2017, if the market rate at the date of issuance I

	Table values are based on: n = i = Cash Flow Table Value Amount Present Value Par (maturity) value Interest (annuity) Price of bonds

Answer 1

1a
Table values are based on:
n =	20
i =	3%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.5537	34000	18826
Interest (annuity)	14.8775	1360	20233
Price of bonds			39059
b
	Debit	Credit
Cash	39059
Bonds payable		34000
Premium on Bonds payable		5059
2a
Table values are based on:
n =	20
i =	4%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.4564	34000	15518
Interest (annuity)	13.5903	1360	18483
Price of bonds			34000
b
	Debit	Credit
Cash	34000
Bonds payable		34000
3a
Table values are based on:
n =	20
i =	5%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.3769	34000	12815
Interest (annuity)	12.4622	1360	16949
Price of bonds			29763
b
	Debit	Credit
Cash	29763
Discount on Bonds payable	4237
Bonds payable		34000