Question

File Home Insert Draw Design Layout References Mailings Review View Help Grammarly P Search 1. McWherter Instruments sold $480 million of 10% bonds, dated January 1, on January 1, 2021. The bonds mature on December 31, 2040 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $480,000 of the bonds as a long- term investment Required: 1. Determine the price of the bonds issued on January 1, 2021. 2. Prepare the journal entries to record (a) Record the issue of bonds payable by McWherter and (b) Record the bond investment by Blanton's on January 1, 2021. 3. Prepare the journal entries by (a) Record the interest expense for McWherter and (b) Record the interest revenue for Blanton on June 30, 2021 (at the effective rate). 4. Prepare the journal entries by (a) Record the interest expense for McWherter and (b) Record the interest revenue for Blanton on December 31, 2021 (at the effective rate). + 100% 158 words Page 1 of 1 8:58 AM 1/29/2020

Answer 1

ans 1
Price of the bonds
PV of interest+PV of principal
24000000*PVIFA (6%,40)+480000000*PVIF(6%,40)
(24000000*15.0463)+(480000000*.097222)	407777760
Interest payments
480000000*5%	24000000

ans 2
date	accounts title	dr	cr
jan 1 2021	cash	$407,777,760
a	Discount on bonds payable	$72,222,240
	bonds payable		480000000
b
jan 1 2021	investment in bonds	480000
	Discount on bonds payable		72222
	cash		$407,778
ans 3 a
june 30 2021	interest expenses	24466666
	Discount on bonds payable		466666
	Interest payable		24000000
b
june 30 2021	cash	24000
	Discount on bonds payable		467
	interest revenue		23533
ans 4
dec 31 2021	interest expenses	24494666
	Discount on bonds payable		494666
	Interest payable		24000000
b
de3c 31 2021	cash	24000
	Discount on bonds payable		495
	interest revenue		23505

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