Question

Exercise 10-17A Computing bond interest and price; recording bond issuance LO C2 Citywide Company issues bonds with a par value of $78,000. The bonds mature in eight years and pay 11% annual interest in semiannual payments. The annual market rate for the bonds is 8%. (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 intermediate calculations to the nearest dollar amount.) Table Values are Based on: 16 i=1 4.0% Cash Flow Table Value Par (maturity) value 0.5339X Interest (annuity) 11.6523 Price of bonds Amount $ 78,000 Present Value $ 41,644 = x $ 41,644 Required 1 Required 2 >

Answer 1

Table value are based on
n = (8*2)	16
i = (8%/2)	4%
Cash flow	Table value	*	Amount	=	Present value
Par (maturity) value	0.5339	*	$       78,000	=	$       41,644
Interest (annuity)	11.6523	*	$         4,290	=	$       49,988
Price of bonds					$       91,633
Interest (78000*11%/2)	$4,290

Journal entry ;
No	Transaction	General journal	Debit	credit
1	1	Cash	$ 91,633
		Bonds payable		$ 78,000
		Premium on bonds payable		$ 13,633

To record the issue of bond