Question

A. Determine the issue price of the debt.

B. Prepare the amortization table for the bond issue through January 1, 2021, assuming that Jones Road uses the effective interest rate method of amortization.

C. Prepare the journal entries to record the bond issue, the first interest entry, and payment of the bonds at maturity. Assume the company uses a premium or discount account if needed.

On January 1, 2018, the Jones Road Corporation issued $800,000 par value, 3%, 5-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest on the date of the bond issue was 4%. The company's fiscal year ends on December 31.

A. Determine the issue price of the debt. (Use the present value and future value​ tables, a financial​ calculator, or a spreadsheet for your calculations. If using present and future value tables or the formula​ method, use factor amounts rounded to five decimal​ places, X.XXXXX. Round your final answers to the nearest whole​ dollar.)

The issue price of the debt is $?

B. Prepare the amortization table for the bond issue through January 1, 2021, assuming that Jones Road uses the effective interest rate method of amortization. (Round each calculation to the nearest whole number and then use the rounded value for each subsequent calculation in the​ table.)

Date Cash Interest Effective Interest Discount/Premium Amortization Carrying Value

Jan 1, 18 ?

Jul 1, 18 ? ? ?   ?

Jan 1, 19 ? ? ?   ?

Jul 1, 19 ? ? ?   ?

Jan 1, 20 ? ? ?   ?

Jul 1, 20 ? ? ?   ?

Jan 1, 21 ? ? ?   ?

C. Prepare the journal entries to record the bond issue, the first interest entry, and payment of the bonds maturity. Assume the company uses a premium or discount account if needed. (Round your answers to the nearest whole dollar. Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

Begin by recording the issuance of the bonds payable.

Account January 1, 2018

? ? | ?

Record the first semiannual interest payment.

Account July 1, 2018

? ? | ?

Prepare the journal entry to record payment of the bonds at maturity.

Account January 1, 2023

? ? | ?

Answer 1

1	Issue price of bonds	Period	Cashflows	Present value	Calculation
		1	$12,000	$11,765	(12000/(1+0.02)^1)
		2	$12,000	$11,534	(12000/(1+0.02)^2)
		3	$12,000	$11,308	(12000/(1+0.02)^3)
		4	$12,000	$11,086	(12000/(1+0.02)^4)
		5	$12,000	$10,869	(12000/(1+0.02)^5)
		6	$12,000	$10,656	(12000/(1+0.02)^6)
		7	$12,000	$10,447	(12000/(1+0.02)^7)
		8	$12,000	$10,242	(12000/(1+0.02)^8)
		9	$12,000	$10,041	(12000/(1+0.02)^9)
		10	$812,000	$666,123	(812000/(1+0.02)^10)
	Selling price of bonds			$764,070
2	Amortisation schedule indicating Cromley's effetive interest expense
	Payment Number	Cash payment	Effective interest	Discount amortisation	Oustanding balance
	1	$                12,000	$              15,281	$                    3,281	$                           767,351
	2	$                12,000	$              15,347	$                    3,347	$                           770,698
	3	$                12,000	$              15,414	$                    3,414	$                           774,112
	4	$                12,000	$              15,482	$                    3,482	$                           777,594
	5	$                12,000	$              15,552	$                    3,552	$                           781,146
	6	$                12,000	$              15,623	$                    3,623	$                           784,769
	7	$                12,000	$              15,695	$                    3,695	$                           788,464
	8	$                12,000	$              15,769	$                    3,769	$                           792,234
	9	$                12,000	$              15,845	$                    3,845	$                           796,078
	10	$              812,000	$              15,922	$             (796,078)	$                                       -
	Totals	$96,000	$124,164
3	Journal entry
	Account titles and explaNetion	Debit	Credit
01-Jan-18	Cash	$764,070
	Discount on bonds payable	$35,930
	Bonds payable		$800,000
	(Bonds issued at discount)
4	Journal entry in books of Cromley
	Account titles and explaNetion	Debit	Credit
01-Jul-18	Interest expense	$15,281
	Discount on bonds payable		$3,281
	Cash		$12,000
	(interest expense booked for first payment)
01-Jan-23	Bonds payable	$796,078
	Interest expense	$15,922
	Cash		$812,000
	(Bond repaid)