Question

Johnson, Inc.

Answer 1

1)Semiannual months: 5* 2 =10

Semiannual Interest : 100000*.09*6/12 = 4500

semiannual yield : 11*6/12 =5.5%

Present value of Principal :PVF 5.5%,10 * Face value

        = .58543*100000

        = $ 58543

Present value of Interest : PVA 5.5%,10*Interest

            = 7.53763*4500

             = 33919.34

price :33919.34+58543 = $ 92462.34 [Rounded to 92462]

2)

Date	Interest paid [A]	Interest expense [B]:[D*.055]	Discount amortised [C] = [B-A]	Bond carrying amount [D]=Last carrying value +C
jan 1 2017				92462
30 june 2017	4500	92462*.055= 5085.41	5085.41-4500=585.41	92462+585.41= 93047.41
1 Jan 2018	4500	5117.61   [93047.41*.055]	617.61   [5117.61-4500]	93665.02      [93047.41+617.61]
30 june 2018	4500	5151.58	651.58	94316.60
1 Jan 2019	4500	5187.41	687.41	95004.01
30 june 2019	4500	5225.22	725.22	95729.23
1 Jan 2020	4500	5265.11	765.11	96494.34
30 june 2020	4500	5307.19	807.19	97301.53
1 Jan 2021	4500	5351.58	851.58	98153.11
30 june 2021	4500	5398.42	898.42	99051.53
1 Jan 2022	4500	5448.47	948.47	100000

3)

Date	Account	Debit	credit
1 jan 2017	cash	92462
	Discount on bond payable	7538
	Bond payable		100000
	[Being bond issued at discount]
30 june 2017	Interest expense	5085.41
	Discount on bond payable		585.41
	cash		4500
	[being first semiannual interest paid]
31 dec 2017	Interest expense	5117.61
	Discount on bond payable		617.61
	Interest payable		4500
	[second semiannual interest accrued]
1jan 2017	INterest payable	4500
	cash		4500