Question

ames Corporation is planning to issue bonds with a face value of $501,500 and a coupon rate of 6 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)

Required:

Compute the issue (sale) price on January 1 of this year for each of the following independent cases:

  

a. Case A: Market interest rate (annual): 4 percent.

b. Case B: Market interest rate (annual): 6 percent.

c. Case C: Market interest rate (annual): 8.5 percent.

Park Corporation is planning to issue bonds with a face value of $790,000 and a coupon rate of 7.5 percent. The bonds mature in 6 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)  

Required:

1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. What bond payable amount will Park report on its June 30 balance sheet? (Enter all amounts with a positive sign.)

Several years ago, Walters Company issued bonds with a face value of $613,000 at par. As a result of declining interest rates, the company has decided to call the bond at a call premium of 10 percent over par. Record the retirement of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

On January 1 of this year, Clearwater Corporation sold bonds with a face value of $761,000 and a coupon rate of 6 percent. The bonds mature in 10 years and pay interest annually every December 31. Clearwater uses the straight-line amortization method and also uses a discount account. Assume an annual market rate of interest of 7 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)

Required:

1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare the journal entry to record the interest payment on December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. How will the bonds be reported on Clearwater's December 31 Balance Sheet?

[The following information applies to the questions displayed below.]

Claire Corporation is planning to issue bonds with a face value of $210,000 and a coupon rate of 10 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Claire uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 12 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)  

8.

value:
10.00 points

Required information

Required:

1. Provide the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)

References

eBook & Resources

General JournalDifficulty: 2 MediumLearning Objective: 10-04 Report bonds payable and interest expense for bond securities issued at a discount.

Check my work

9.

value:
10.00 points

Required information

2. Provide the journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)

Serotta Corporation is planning to issue bonds with a face value of $380,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

11.

value:
10.00 points

Required information

1. Provide the journal entry to record the issuance of the bonds January 1.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)

References

eBook & Resources

General jounralDifficulty: 2 MediumLearning Objective: 10-05 Report bonds payable and interest expense for bond securities issued at a premium.

Check my work

12.

value:
10.00 points

Required information

2. Provide the journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)

References

eBook & Resources

General jounralDifficulty: 2 MediumLearning Objective: 10-05 Report bonds payable and interest expense for bond securities issued at a premium.

Check my work

13.

value:
10.00 points

Required information

3. What bonds payable amount will Serotta report on this year's December 31 balance sheet? (Round your final answers to nearest whole dollar amount.)

Answer 1

Solution:

All the questions are individual questions. I am solving the first problem

Problem 1

Part a --- the issue (sale) price on January 1 of this year Case A: Market interest rate (annual): 4 percent

Semi Annual Stated Coupon Interest = face Value 501,500 x Coupon Rate 6% * 1/2half yearly = $15,045

Semiannual period to maturity (n) = 10 years x 2 = 20

Semi Annual Market Interest Rate (R) = 4%*1/2 = 2%

Present Value of Bonds (Price of the bonds issued) = Semi Annual Coupon Interest x PVIFA (R, n) + Face Value x PVIF (R, n)

= (15,045*16.351) + (501,500*0.673)

= $246,000.80 + 337,509.50

= $583,510

Note –Answer may be different slightly due to decimal places of PV factor. In this case please provide pv factor table to get the very correct answer.

Note -- Calculation of Present Value Factor (Rounded to 3 decimal places)

PVIFA (R, n) = Present Value interest factor for ordinary annuity at R% for n periods = (1 – 1/(1+R)ⁿ) / R

PVIFA (2%, 20) = (1 – 1/(1+0.02)²⁰) / 0.02 = 16.351

PVIF (R, n) = Present Value interest factor for ‘n’ period at ‘R’% = 1/(1+R)ⁿ

PVIF (2%, 20) = 1/(1+0.02)²⁰= 0.673

Part B --- the issue (sale) price on January 1 of this year Case A: Market interest rate (annual): 4 percent

Semi Annual Stated Coupon Interest = face Value 501,500 x Coupon Rate 6% * 1/2half yearly = $15,045

Semiannual period to maturity (n) = 10 years x 2 = 20

Semi Annual Market Interest Rate (R) = 6%*1/2 = 3%

Present Value of Bonds (Price of the bonds issued) = Semi Annual Coupon Interest x PVIFA (R, n) + Face Value x PVIF (R, n)

= (15,045*14.878) + (501,500*0.554)

= 223,839.50 + 277,831

= $501,670.51 or $501,671

Note –Answer may be different slightly due to decimal places of PV factor. In this case please provide pv factor table to get the very correct answer.

Note -- Calculation of Present Value Factor (Rounded to 3 decimal places)

PVIFA (R, n) = Present Value interest factor for ordinary annuity at R% for n periods = (1 – 1/(1+R)ⁿ) / R

PVIFA (3%, 20) = (1 – 1/(1+0.03)²⁰) / 0.03 = 14.878

PVIF (R, n) = Present Value interest factor for ‘n’ period at ‘R’% = 1/(1+R)ⁿ

PVIF (3%, 20) = 1/(1+0.03)²⁰= 0.554

Part C --- the issue (sale) price on January 1 of this year Case A: Market interest rate (annual): 4 percent

Semi Annual Stated Coupon Interest = face Value 501,500 x Coupon Rate 6% * 1/2half yearly = $15,045

Semiannual period to maturity (n) = 10 years x 2 = 20

Semi Annual Market Interest Rate (R) = 8.5%*1/2 = 4.25%

Present Value of Bonds (Price of the bonds issued) = Semi Annual Coupon Interest x PVIFA (R, n) + Face Value x PVIF (R, n)

= (15,045*13.294) + (501,500*0.435)

= 200,008.2 + 218,152.5

= $418,160.73 or $418,161

Note –Answer may be different slightly due to decimal places of PV factor. In this case please provide pv factor table to get the very correct answer.

Note -- Calculation of Present Value Factor (Rounded to 3 decimal places)

PVIFA (R, n) = Present Value interest factor for ordinary annuity at R% for n periods = (1 – 1/(1+R)ⁿ) / R

PVIFA (4.25%, 20) = (1 – 1/(1+0.0425)²⁰) / 0.0425 = 13.294

PVIF (R, n) = Present Value interest factor for ‘n’ period at ‘R’% = 1/(1+R)ⁿ

PVIF (4.25%, 20) = 1/(1+0.0425)²⁰= 0.435

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.