Question
In: Accounting
On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 10% bonds dated
January 1, 2018, with a face amount of $19.8 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1)
Required:
1. Determine the price of the bonds at January 1,
2018.
2. Prepare the journal entry to record the bond
issuance by Bishop on January 1, 2018.
3. Prepare the journal entry to record interest on
June 30, 2018, using the effective interest method.
4. Prepare the journal entry to record interest on
December 31, 2018, using the effective interest method.
Solutions
Expert Solution
1.
Determine the price of the bonds as follows:
Therefore, the price of the bonds is $17,528,955.60
Above figures have been calculated in the following manner:
2.
Prepare the journal entry to record the issuance of bonds as follows:
3.
Prepare the journal entry to record interest on June 30, 2018, as follows:
4.
Prepare the journal entry to record interest on December 31, 2018, as follows:
ekkarill92 answered 3 hours agoRelated Solutions
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