Question

Exercise 10-16A Computing bond interest and price; recording bond issuance LO C2 Bringham Company issues bonds with a par value of $610,000. The bonds mature in 9 years and pay 9% annual interest in semiannual payments. The annual market rate for the bonds is 12%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. Compute the price of the bonds as of their issue date. 2. Prepare the journal entry to record the bonds' issuance. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the price of the bonds as of their issue date. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round intermediate calculations to the nearest dollar amount.) Table Values are Based on: 18 6.0% i = Cash Flow Table Value Amount $ 610,000 Present Value $ 213,683 = Par (maturity) value Interest (annuity) Price of bonds 0.3503 10.8276 X X $ 213,683 Required 1 Required 2 >

Answer 1

Part 1

Table values are based on:
n=	18
i =	6%
Cash flow	Table value		Amount		Present value
Par (maturity) value	0.3503	X	610000	=	213683
Interest (annuity)	10.8276	x	27450	=	297218
					$510901

Interest = 610000*9%/2 = 27450

PV factor of $1 @ n= 18, i = 6% is 0.3503

PV of ordinary annuity factor of $1 @ n=18, i = 6% is 10.8276

Part 2

Transaction	General journal	Debit	Credit
1	Cash	510901
	Discount on bonds payable	99099
	Bonds payable		610000