Question

Hartford Research issues bonds dated January 1 that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.)

Required:
Consider each separate situation.

1. The market rate at the date of issuance is 10%.
(a) Complete the below table to determine the bonds' issue price on January 1.
(b) Prepare the journal entry to record their issuance.
2. The market rate at the date of issuance is 12%.
(a) Complete the below table to determine the bonds' issue price on January 1.
(b) Prepare the journal entry to record their issuance.
3. The market rate at the date of issuance is 14%.
(a) Complete the below table to determine the bonds' issue price on January 1.
(b) Prepare the journal entry to record their issuance.

1a.

	Table values are based on: n = i = Cash Flow Table Value Amount Present Value Par (maturity) value Interest (annuity) Price of bonds

1b.

Record the issue of bonds with a par value of $31,000 on Jan 01. Assume that the market rate of interest at the date of issue is 10%.

date	general journal	debit	credit
jan 01

2a.

	Table values are based on: n = i = Cash Flow Table Value Amount Present Value Par (maturity) value Interest (annuity) Price of bonds

2b.

Record the issue of bonds with a par value of $31,000 on Jan 01. Assume that the market rate of interest at the date of issue is 12%.

date	general journal	debit	credit
jan 01

3a.

	Table values are based on: n = i = Cash Flow Table Value Amount Present Value Par (maturity) value Interest (annuity) Price of bonds

3b.

Record the issue of bonds with a par value of $31,000 on Jan 01. Assume that the market rate of interest at the date of issue is 14%.

date	general journal	debit	credit
jan 01

Answer 1

Part-1(a)
Table values are based on:
n =20
i =5%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.3769	$31,000.00	$11,684
Interest (annuity)	12.4622	$1,860.00	$23,180
Price of bonds			$34,864
Part(1(b) :- Journal Entry
Account Tittle	Debit	Credit
Cash	$34,864.00
Bond Payable		$31,000.00
Premium on Bond		$3,864.00
Part-2(a)
Table values are based on:
n =20
i =6%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.31181	$31,000.00	$9,666
Interest (annuity)	11.4699	$1,860.00	$21,334
Price of bonds			$31,000
Part-2(b) :- Journal Entry
Account Tittle	Debit	Credit
Cash	$31,000.00
Bond Payable		$31,000.00
Part-3(a)
Table values are based on:
n =20
i =7%
Cash Flow	Table Value	Amount	Present Value
Par (maturity) value	0.2584	$31,000.00	$8,010
Interest (annuity)	10.594	$1,860.00	$19,705
Price of bonds			$27,715
Part-3(b) :- Journal Entry
Account Tittle	Debit	Credit
Cash	$27,715.00
Discount on Bond Payable	$3,285.00
Bond Payable		$31,000.00