Madison Corporation is authorized to issue $500,000 of 5-year bonds dated June 30, 2016, with a...

Madison Corporation is authorized to issue $500,000 of 5-year bonds dated June 30, 2016, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2016.

Required:

Determine the proceeds that the company will receive if it sells the following: (Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.)

1. The bonds to yield 12%	$
2. The bonds to yield 10%	$

Bryan Company issued $500,000 of 10% face value bonds on January 1, 2016, for $486,000. The bonds are due December 31, 2018, and pay interest semiannually on June 30 and December 31. Bryan uses the straight-line amortization method.

Required:

Prepare the journal entries to record the issuance of the bonds and the first two interest payments.

Solutions

Expert Solution

Q1.		Q2.
par value of bondds	500000	Par value f bonds		500000
Semi annual cash interest (50000011%6/12)	27500	Issue price		486000
		Total discount		14000
Annuity PVF for 10 periods at 6%	7.36009	Divide: Number of periods:		6
PVF at 6% for 10th period	0.55839	Discount amortized each period		2333.333
Present value of interest payments	202402.5	Cash semi annual interest (50000010%6/12)		25000
Present value of Maturity value	279195	Interest expenses		27333
Price of bonds	481597.5
		Journal entries:
		Date	Accounts title and explanations		Debit $	Credit $
at Yield of 10%		01.01.16	Cash account		486000
par value of bondds	500000		Discount on Bonds payable		14000
Semi annual cash interest (50000011%6/12)	27500		Bonds Payable			500000

Annuity PVF for 10 periods at 5%	7.72173	30.06.16	Interest expenses		27333
PVF at 5% for 10th period	0.61391		Cash account			25000
Present value of interest payments	212347.6		Discount on bonds payable			2333
Present value of Maturity value	306955
Price of bonds	519302.6	31.12.16	Interest expenses		27333
			Cash account			25000
			Discount on bonds payable			2333

ekkarill92 answered 1 year ago

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