On May 1, 2020, Johnson Corporation issued $300,000, ten-year, 12% bonds which were priced to yield...

On May 1, 2020, Johnson Corporation issued $300,000, ten-year, 12% bonds which were priced to yield 14%. The bonds were dated March 1, 2020, and pay interest semiannually on March 1 and September 1. Johnson is a calendar year corporation. Determine the issue price of the bonds and prepare the September 1, 2020 journal entry for Johnson Corporation.

Expert Solution

Issue price:

Cash interest = $300,000 x 6% =$18,000


Present value of cash interest	$190,692
[$18,000 x 10.59401 PV annuity factor at 7% for 20 periods]
Present value of face value	$77,526
[$300,000 x 0.25842 PV factor at 7% for 20 periods]
Price of the bond	$268,218
Add: Accrued interest [Mar 1 2020 to May 1 2020] = $300,000 x 12% x 2/12]	$6,000
Cash received from the bond	$274,218

Journal Entry:

Date	Account title and explanation	Debit	Credit
Sept 1, 2020	Interest payable	$6,000
	Interest expense [($268,218 x 7% ) - $6,000]	$12,775
	Discount on bonds payable		$775
	Cash		$18,000
	[To record payment of interest]

ekkarill92 answered 3 years ago

Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield...

Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 5.5%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places.

Personal After-Tax Yield Corporate bonds issued by Johnson Corporation currently yield 10.5%. Municipal bonds of equal...

Personal After-Tax Yield Corporate bonds issued by Johnson Corporation currently yield 10.5%. Municipal bonds of equal risk currently yield 5.5%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places. ___ Corporate After-Tax Yield The Shrieves Corporation has $25,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 9.75%, state of Florida muni bonds, which yield 6% (but are not taxable), and AT&T...

On January 1, 2012, Corporation A issued $18,000,000 of 10% ten-year bonds at 103. The bonds...

On January 1, 2012, Corporation A issued $18,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Corporation A at 105. Corporation A has recorded amortization of the bond premium on the straight line method. On December 31, 2018, when the fair value of the bonds was 96, Corporation A repurchased $4,000,000 if the bonds in the open market at 96. Corporation A has recorded interest and amortization for 2018. What amount of gain/loss(ignoring income...

Sunrise Corporation issued$300,000 of 6%,10-year bonds on January 1,2021,for$311,076.This price provided a yield of 8%on the...

Sunrise Corporation issued$300,000 of 6%,10-year bonds on January 1,2021,for$311,076.This price provided a yield of 8%on the bonds.Interest is payable semiannually on June 30 and December 31.If Sunrise uses the effective-interest method and fiscal year-end is on October 31,the amount of interest expense reported on the income statement for the year ended October 31, 2021 should be:

1. Sage Corporation issued $516,000 of 6% bonds on May 1, 2017. The bonds were dated...

1. Sage Corporation issued $516,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Sage’s journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. 2. The Cullumber Company issued $220,000 of 8% bonds on January 1, 2017. The bonds...

A company issued $700,000 of 9%, ten-year convertible bonds on January 1, 2020 at 95, with...

A company issued $700,000 of 9%, ten-year convertible bonds on January 1, 2020 at 95, with interest payable July 1 and January 1. Bond discount/premium is amortized semiannually on a straight-line basis. On July 1, 2023, these bonds were converted into common stock. What should be the amount of the unamortized bond discount/premium on July 1, 2023 relating to the bonds converted?

On January 1, 2020, Archer Company issued ten-year bonds with a face value of $10,000,000 and...

On January 1, 2020, Archer Company issued ten-year bonds with a face value of $10,000,000 and a stated interest rate of 4%, payable semiannually on June 30 and December 31. The bonds were sold to yield 3%. Instructions 1-Calculate the issue price of the bonds. 2-Record the bond issuance 3-Record the first interest payment and use the straight line method to amortize the discount or premium.

On January 1, 2020, Drilling Company issued ten-year bonds with a face value of $10,000,000 and...

On January 1, 2020, Drilling Company issued ten-year bonds with a face value of $10,000,000 and a stated interest rate of 4%, payable semiannually on June 30 and December 31. The bonds were sold to yield 3%. Instructions 1-Calculate the issue price of the bonds. 2-Record the bond issuance 3-Record the first interest payment and use the straight line method to amortize the discount or premium.

On November 1, 2015, Davis Company issued $30,000, ten-year, 6% bonds for $29,260. The bonds were...

On November 1, 2015, Davis Company issued $30,000, ten-year, 6% bonds for $29,260. The bonds were dated November 1, 2015, and interest is payable each on May 1 and November 1. Davis uses the straight-line method of amortization. How much is the book value of the bonds after the November 1, 2016 interest payment was recorded using the straight-line method of amortization?

The Kell Company issued $600,000 of 10 year, 12% bonds at 99. The bonds were issued...

The Kell Company issued $600,000 of 10 year, 12% bonds at 99. The bonds were issued on January 1, 20x1, with interest payable semiannually on June 30 and December 31. REQUIRED: Present the journal entries for each of the following: The issuance of the bonds. The payment of interest for the first six months. Amortization for the first six months. The retirement of 1/2 the bonds at 102 on January 1, 20x5.

Question