Question

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Exercise 14-3 (Algo) Determine the price of bonds; issuance; effective interest (LO14-2] The Bradford Company issued 14% bonds, dated January 1, with a face amount of $89 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 16%. Interest is paid semiannually on June 30 and December 31. (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.) eBook Required: 1. Determine the price of the bonds at January 1, 2021. 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate) Hint Complete this question by entering your answers in the tabs below. Ask Reg 1 Reg 2 to 4 Print Determine the price of the bonds at January 1, 2021. (Enter your answers whole dollars.) Eferences Table values are based on: Amount Present Value Cash Flow Interest Principal Price of bonds Reg 1 Req 2 to 4 >

Answer 1

1	n =	20
	I =	8%
	Cash Flow	Amount	Present Value
	Interest	$6,230,000	$61,167,075
	Principal	$89,000,000	$19,094,950
	Price of bonds		$80,262,025
	Date	General Journal	Debit	Credit
2	Jan 1	Cash	$80,262,025
		Discount on Bonds Payable	$8,737,976
		Bonds Payable		$89,000,000
3	June 30	Interest Expense	$6,420,962		($80,262,025 x 8%)
		Discount on Bonds Payable		$190,962	Balance
		Cash		$6,230,000	($89,000,000 x 7%)
4	Dec 31	Interest Expense	$6,436,239		[($80,262,025 + $190,962) x 8%]
		Discount on Bonds Payable		$206,239	Balance
		Cash		$6,230,000	($89,000,000 x 7%)