Question
In: Accounting
On January 1, 2021, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2021, Instaform, Inc., issued 10% bonds with a face amount of $49 million, dated January 1. The bonds mature in 2040 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required: 1-a. Determine the price of the bonds at January 1, 2021.
1-b. Prepare the journal entry to record their issuance by Instaform.
2-a. Assume the market rate was 9%. Determine the price of the bonds at January 1, 2021.
2-b. Assume the market rate was 9%. Prepare the journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.
Solutions
Expert Solution
Solution 1a:
| Computation of bond price | |||
| Table values are based on: | |||
| n= | 40 | ||
| i= | 6.00% | ||
| Cash flow | Table Value | Amount | Present Value |
| Par (Maturity) Value | 0.09722 | $49,000,000.00 | $4,763,780 |
| Interest (Annuity) | 15.04630 | $2,450,000.00 | $36,863,435 |
| Price of bonds | $41,627,215 |
Solution 1b:
| Journal Entries - Instaform Inc. | |||
| Event | Particulars | Debit | Credit |
| 1-Jan-21 | Cash Dr | $41,627,215.00 | |
| Discount on issue of bond Dr | $7,372,785.00 | ||
| To Bond Payable | $49,000,000.00 | ||
| (To record issue of bond at discount) |
Solution 2a:
| Computation of bond price | |||
| Table values are based on: | |||
| n= | 40 | ||
| i= | 4.50% | ||
| Cash flow | Table Value | Amount | Present Value |
| Par (Maturity) Value | 0.17193 | $49,000,000.00 | $8,424,570 |
| Interest (Annuity) | 18.40158 | $2,450,000.00 | $45,083,871 |
| Price of bonds | $53,508,441 |
Solution 2b:
| Journal Entries - Instaform Inc. | |||
| Date | Particulars | Debit | Credit |
| 1-Jan-21 | Cash Dr | $53,508,441.00 | |
| To Bond Payable | $49,000,000.00 | ||
| To Premium on Bond Payable | $4,508,441.00 | ||
| (To record issue of bond at premium) |
Solution 3:
| Journal Entries - Broadcourt Electronics | |||
| Date | Particulars | Debit | Credit |
| 1-Jan-21 | Investment in Bond Dr | $49,000,000.00 | |
| Premium on bond investment Dr | $4,508,441.00 | ||
| To Cash | $53,508,441.00 | ||
| (To record investment in bond) |
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $49 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $65 million,...
On January 1, 2021, Instaform, Inc., issued 12% bonds with a
face amount of $65 million, dated January 1. The bonds mature in
2040 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $58 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $58 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually.
Required:
1-a. Determine the price of the bonds at January 1,
2018.
1-b. Prepare the journal entry to record their
issuance by Instaform.
2-a. Assume the market rate was 9%. Determine the
price of the bonds at January...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $75 million,...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a
face amount of $75 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.) Required: 1-a.
Determine the price of the bonds at January 1, 2018....
On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $55 million,...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a
face amount of $55 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2018, Instaform, Inc., issued 14% bonds with a face amount of $50 million,...
On January 1, 2018, Instaform, Inc., issued 14% bonds with a
face amount of $50 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 16%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2021, Baddour, Inc., issued 10% bonds with a face amount of $168 million....
On January 1, 2021, Baddour, Inc., issued 10% bonds with a face
amount of $168 million. The bonds were priced at $147.2 million to
yield 12%. Interest is paid semiannually on June 30 and December
31. Baddour’s fiscal year ends September 30. Required: 1. What
amount(s) related to the bonds would Baddour report in its balance
sheet at September 30, 2021? 2. What amount(s) related to the bonds
would Baddour report in its income statement for the year ended
September...
On January 1, 2021, Charles, Inc., issued 12% bonds with a face amount of $17 million....
On January 1, 2021, Charles, Inc., issued 12% bonds with a face
amount of $17 million. The bonds were priced at $14 million to
yield 14%. Interest is paid semiannually on June 30 and December
31. Charles’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Charles report in its
balance sheet at September 30, 2021?
2. What amount(s) related to the bonds would Charles report in its
income statement for the year ended September...
On January 1, 2021, Charles, Inc., issued 12% bonds with a face amount of $17 million....
On January 1, 2021, Charles, Inc., issued 12% bonds with a face
amount of $17 million. The bonds were priced at $14 million to
yield 14%. Interest is paid semiannually on June 30 and December
31. Charles’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Charles report in its
balance sheet at September 30, 2021?
2. What amount(s) related to the bonds would Charles report in its
income statement for the year ended September...
On January 1, 2021, Baddour, Inc., issued 12% bonds with a face amount of $163 million....
On January 1, 2021, Baddour, Inc., issued 12% bonds with a face
amount of $163 million. The bonds were priced at $142.7 million to
yield 14%. Interest is paid semiannually on June 30 and December
31. Baddour’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Baddour report in
its balance sheet at September 30, 2021?
2. What amount(s) related to the bonds would Baddour report in
its income statement for the year ended September...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Suppose you have $250,000 of loan. The terms of the loan are that the yearly interest...
- Describe where Broca’s area and Wernicke’s areas are located in the brain. Compare and contrast the...
- Switzerland, a country with a special status outside the EU, banned the imports of agricultural products...
- A playground merry-go-round has a disk-shaped platform that rotates with negligible friction about a vertical axis....
- CASE STUDY The Alcatel-Lucent Merger—What Went Wrong? It did not take long after the merger for...
- To complete each assignment, you will need to read the case study. Assume that the client...
- Define reliability, failure, and normal operating conditions. Identify and list the various ways to improve reliability.
ADVERTISEMENT