Part 1
Bond price |
$331365440 |
Payments |
Amount |
PV factor |
Present value |
||
Interest |
16000000 |
x |
17.15909 |
= |
274545440 |
Principal |
400000000 |
x |
0.14205 |
= |
56820000 |
Present value |
331365440 |
4% x $400,000,000= 16000000
Present value of an ordinary annuity of $1: n= 40, i= 5% = 17.15909
Present value of $1: n= 40, i= 5% = 0.14205
Part 2 A
Date |
General journal |
Debit |
Credit |
January 1, 2021 |
Cash |
331365440 |
|
Discount on bonds (difference) |
68634560 |
||
Bonds payable |
400000000 |
Part 2 B
Date |
General journal |
Debit |
Credit |
January 1, 2021 |
Bond Investment |
400000 |
|
Discount on bond investment |
68634560 |
68635 |
|
Cash |
331365 |
Part 3 A
Date |
General journal |
Debit |
Credit |
June 30, 2021 |
Interest expense (5%*331365440) |
16568272 |
|
Discount on bonds payable (difference) |
568272 |
||
Cash (4%*400000000) |
16000000 |
Part 3 B
Date |
General journal |
Debit |
Credit |
June 30, 2021 |
Cash (4%*400000) |
16000 |
|
Discount on bond investment (difference) |
568 |
||
Interest revenue (5%*331365) |
16568 |
Part 4 A
Date |
General journal |
Debit |
Credit |
December 31, 2021 |
Interest expense (5%*(331365440+568272)) |
16596686 |
|
Discount on bonds payable (difference) |
596686 |
||
Cash (4%*400000000) |
16000000 |
Part 4 B
Date |
General journal |
Debit |
Credit |
December 31, 2021 |
Cash (4%*400000) |
16000 |
|
Discount on bond investment (difference) |
597 |
||
Interest revenue (5%*(331365+568) |
16597 |
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