Question
In: Accounting
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $58 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $58 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually.
Required:
1-a. Determine the price of the bonds at January 1,
2018.
1-b. Prepare the journal entry to record their
issuance by Instaform.
2-a. Assume the market rate was 9%. Determine the
price of the bonds at January 1, 2018.
2-b. Assume the market rate was 9%. Prepare the
journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the
entire issue in a private placement of the bonds. Using the data in
requirement 2, prepare the journal entry to record the purchase by
Broadcourt.
Solutions
Expert Solution
| 1-a. Determine the price of the bonds at January 1, 2018. | ||
| Semiannual cash interest | 10% x 58,000,000 x 6/12 | |
| 2900000 | ||
| Present value of interest | ||
| payments @ 6% | 15.0463*2900000 | 43634270 |
| Present value of $58,000,000 | 0.09722 x 58,000,000 |
5638760 |
| Price of bonds | 49273030 | |
| General Journal | Debit | Credit |
| Cash | 49273030 | |
| Discount on Bonds payable | 8,726,970 | |
| Bonds payable | 58,000,000 | |
| 2 | ||
| Semiannual cash interest: | 10% x 58,000,000 x 6/12 | |
| 2900000 | ||
| Present value of interest | ||
| payments @ 4.5% | 18.40158*2900000 | 53364582 |
| Present value of $58,000,000 | 0.17193*58000000 | 9971940 |
| Price of bonds | 63336522 | |
| General Journal | Debit | Credit |
| Cash | 63336522 | |
| Primium on Bonds payable | 5,336,522 | |
| Bonds payable | 58,000,000 | |
| 3 | ||
| Semiannual cash interest: | 10% x 58,000,000 x 6/12 | |
| 2900000 | ||
| Present value of interest | ||
| payments @ 4.5% | 18.40158*2900000 | 53364582 |
| Present value of $58,000,000 | 0.17193*58000000 | 9971940 |
| Price of bonds | 63336522 | |
| General Journal | Debit | Credit |
| Investment in bonds | 58,000,000 | |
| Primium on Bonds payable | 5,336,522 | |
| Bonds payable | 63336522 | |
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $49 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $50 million,...
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $50 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2018....
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On January 1, 2018, Instaform, Inc., issued 12% bonds with a
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maturity is 14%. Interest is paid semiannually. (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-a.
Determine the price of the bonds at January 1, 2018....
On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $55 million,...
On January 1, 2018, Instaform, Inc., issued 12% bonds with a
face amount of $55 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2018, Instaform, Inc., issued 14% bonds with a face amount of $50 million,...
On January 1, 2018, Instaform, Inc., issued 14% bonds with a
face amount of $50 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 16%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2018....
On January 1, 2021, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...
On January 1, 2021, Instaform, Inc., issued 10% bonds with a
face amount of $49 million, dated January 1. The bonds mature in
2040 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $65 million,...
On January 1, 2021, Instaform, Inc., issued 12% bonds with a
face amount of $65 million, dated January 1. The bonds mature in
2040 (20 years). The market yield for bonds of similar risk and
maturity is 14%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $45 million,...
On January 1, 2021, Instaform, Inc., issued 12% bonds with a
face amount of $45 million, dated January 1. The bonds mature in
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maturity is 14%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2021....
On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $162 million....
On January 1, 2018, Baddour, Inc., issued 10% bonds with a face
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yield 12%. Interest is paid semiannually on June 30 and December
31. Baddour’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Baddour
report in its balance sheet at September 30, 2018?
2. What amount(s) related to the bonds would
Baddour report in its income statement for the year ended September...
On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $160 million....
On January 1, 2018, Baddour, Inc., issued 10% bonds with a face
amount of $160 million. The bonds were priced at $140 million to
yield 12%. Interest is paid semiannually on June 30 and December
31. Baddour’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Baddour
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