Question

Blossom issued $360,000 of 5%, 5-year bonds on January 1, 2021. Interest is payable semi-annually.

Calculate the price of the bond: (a) 4%, (b) 5%, and (c) 6%. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answer to 0 decimal places, e.g. 5,275.)

Click here to view the factor table. Present Value of 1
Click here to view the factor table. Present Value of an Annuity of 1

(a)	Market interest rate 4%		$enter a dollar amount rounded to 0 decimal places
(b)	Market interest rate 5%		$enter a dollar amount rounded to 0 decimal places
(c)	Market interest rate 6%		$enter a dollar amount rounded to 0 decimal places

Prepare the journal entry to record the issuance of the bond assuming the market rate of interest is: (a) 4%, (b) 5%, and (c) 6%. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
(a)	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	(To record issuance of bonds.)
(b)	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	(To record issuance of bonds.)
(c)	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	enter an account title to record issuance of bonds	enter a debit amount	enter a credit amount
	(To record issuance of bonds.)

Answer 1

Solution a:

Computation of bond price
Table values are based on:
n=	10
i=	2.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.82035	$360,000.00	$295,326
Interest (Annuity)	8.98259	$9,000.00	$80,843
Price of bonds			$376,169

Journal Entries - Blossom
Date	Particulars	Debit	Credit
1-Jan-21	Cash Dr	$376,169.00
	To Bond Payable		$360,000.00
	To Premium on Bond Payable		$16,169.00
	(To record issue of bond at premium)

Solution b:

Computation of bond price
Table values are based on:
n=	10
i=	2.50%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.7812	$360,000.00	$281,231
Interest (Annuity)	8.7521	$9,000.00	$78,769

Journal Entries - Blossom
Event	Particulars	Debit	Credit
1-Jan-21	Cash Dr	$360,000.00
	To Bond Payable		$360,000.00
	(To record issue of bond at par)

solution c:

Computation of bond price
Table values are based on:
n=	10
i=	3.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.7441	$360,000.00	$267,876
Interest (Annuity)	8.5302	$9,000.00	$76,772
Price of bonds			$344,648

Journal Entries - Blossom
Event	Particulars	Debit	Credit
1-Jan-21	Cash Dr	$344,648.00
	Discount on issue of bond Dr	$15,352.00
	To Bond Payable		$360,000.00
	(To record issue of bond at discount)