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In: Accounting

On January 1, 2017, Albany Company issued 8% bonds dated January 1, 2017, with a face...

On January 1, 2017, Albany Company issued 8% bonds dated January 1, 2017, with a face amount of $10 million. The bonds mature January 1, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.

         

          Required:

  1. Determine the price of the bonds at January 1, 2017. You must show all of the steps to receive full credit.
  2. Prepare the journal entry to record the bond issuance by Albany on January 1, 2017. You must show your work.
  3. Prepare the journal entries to record interest on June 30, 2017 and December 31, 2017, using the effective interest method. You must show your work.
  4. What amount(s) related to the bonds would Albany Company report in its financial statements (Balance Sheet, Income Statement, and Statement of Cash Flows) dated December 31, 2017? You must show your work and show how it would be properly displayed.
  5. What is the outstanding balance of the Bonds Payable on December 31, 2019?
  6. Prepare the journal entry for the bond’s maturity on January 1, 2027. Hint: You have to assume a journal entry was made on December 31, 2026 and take that into account for your final “payoff” journal entry.

Solutions

Expert Solution

for formulas and calculations, refer to the image below -

ekkarill92 answered 2 years ago
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