In: Accounting
Universal Foods issued 12% bonds, dated January 1, with a face
amount of $200 million on January 1, 2021. The bonds mature on
December 31, 2030 (10 years). The market rate of interest for
similar issues was 14%. Interest is paid semiannually on June 30
and December 31. Universal uses the straight-line method. (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. Determine the price of the bonds at January 1,
2021.
2. to 4. Prepare the journal entries to record
their issuance by Universal Foods on January 1, 2021, interest on
June 30, 2021 and interest on December 31, 2028.