Question

When Patey Pontoons issued 4% bonds on January 1, 2021, with a face amount of $520,000, the market yield for bonds of similar risk and maturity was 5%. The bonds mature December 31, 2024 (4 years). 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.)

Required:
1. Determine the price of the bonds at January 1, 2021.
2. Prepare the journal entry to record their issuance by Patey on January 1, 2021.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2021.
5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2021?
6. What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2021? (Ignore income taxes.)
7. Prepare the appropriate journal entries at maturity on December 31, 2024.requirements 1-7 all look the same as the first one. i think i keep messing up what tables to use :/ please help!

Connect HW 7 (Chapter 14) Saved 2 When Patey Pontoons Issued 4% bonds on January 1, 2021, with a face amount of $520,000, the market yleld for bonds of similar risk and maturity was 5 %. The bonds mature December 31, 2024 (4 years). Interest Is pald semiannually on June 30 and December 31. (FV of $1. PV of $1. EVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 3.33 Required: 1. Determine the price of the bonds at January 1, 2021 2. Prepare the Jounal entry to record their Issuance by Patey on January 1, 2021 3. Prepare an amortization schedule that determines Interest at the effective rate each perlod 4. Prepare the jounal entry to record Interest on June 30, 2021 5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2021? 6. What Is the amount related to the bonds that Patey will report In Its Income statement for the year ended December 31, 2021? (lgnore Income taxes.) 7. Prepare the approprlate Journal entries at maturity on December 31, 2024. points eBook Print Complete this question by entering your answers in the tabs below. References Req 1 Req 2 Req 3 Req 4 Req 5 and 6 Req 7 Determine the price of the bonds at January 1, 2021. (Round final answers to the nearest whole dollar.) Table values are based on: n= Cash Flow Amount Present Value Interest Principal Price of bonds Req 2 Req 1

Answer 1

Solutions:

8 Half years Solution 1: Chart Values are based on: 0.975609756 n= (4 Years*2) 0.951814396 i= (5%/2) 2.50% Semi annual 0.928599411 Cash Flow Table Value * Amount = Present Value 0.905950645 Principal 0.820747 * $520,000/= $426,788 0.883854288 Interest (Annuity) ($520,000*4%*6/12] 7.170137 $10,400 = $74,569 0.862296866 Price of Bonds $501,358 0.841265235 0.820746571 7.170137167 14 15 Solution 2: Patey Pontoons Journal Entries Particulars Date Debit Credit $501,358 $18,642 01-Jan-21 Cash A/c Dr Discount on Bond Payable To bonds payable (Being bond issued at Discount) $520,000 Solution 3: Bond Amortization Schedule Interest Discount Date Cash interest Unamortized discount Expense amortization 01-Jan-21 $18,642 30-Jun-21 $10,400 $12,534 $2,134 $16,508 31-Dec-21 $10,400 $12,587 $2,187 $14,321 30-Jun-22 $10,400 $12,642 $2,242 $12,079 31-Dec-22 $10,400 $12,698 $2,298 $9,781 30-Jun-23 $10,400 $12,755 $2,355 $7,426 31-Dec-23 $10,400 $12,814 $2,414 $5,011 30-Jun-24 $10,400 $12,875 $2,475 $2,537 31-Dec-24 $10,400 $12,937 $2,537 $0 Carrying value $501,358 $503,492 $505,679 $507,921 $510,219 $512,574 $514,989 $517,463 $520,000 Credit Solution 4: Journal Entries Date Particulars 30-Jun-21 Interest Expense Dr To Discount on bond payable To Cash (To record Interest on June 30, 2021) Debit $12,534 $2,134 $10,400 Sheet6 (6) Sheet60 Sheet61 Sheet63 Sheet62 Sheet62 (4) Sheet225

B D F G H I 34 35 36 Solution 5: Bonds reported on December 31, 2021 = 505679 37 38 Solution 6: Interest expense to be reported in Income statement = 39 25121 40 41 Solution 7: 42 43 44 Credit Journal Entries Date Particulars 31-Dec-24 Interest Expense Dr To Discount on bond payable To Cash Debit $12,937 $2,537 $10,400 49 $520,000 31-Dec-24 Bond Payable Dr To Cash 51 $520,000 52 53 58 59 60 61 62 Sheet6 (6) Sheet60 Sheet61 ) Sheet63 ) Sheet62 Sheet62 (4 Sheet225