Solution 1:
Computation of bond price | |||
Table values are based on: | |||
n= | 20 | ||
i= | 7.00% | ||
Cash flow | Table Value | Amount | Present Value |
Par (Maturity) Value | 0.25842 | $96,000,000.00 | $24,808,320 |
Interest (Annuity) | 10.59401 | $5,760,000.00 | $61,021,498 |
Price of bonds | $85,829,818 |
Solution 2-4:
Bond Amortization Schedule (Partial) | |||||
Period | Cash Paid | Interest Expense | Discoount Amortized | Unamortized Discount | Carrying Value |
1-Jan-21 | $10,170,182 | $85,829,818 | |||
30-Jun-21 | $5,760,000 | $6,008,087 | $248,087 | $9,922,095 | $86,077,905 |
31-Dec-21 | $5,760,000 | $6,025,453 | $265,453 | $9,656,641 | $86,343,359 |
Journal Entries - Bradford Company | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Cash Dr | $85,829,818.00 | |
Discount on issue of bond Dr | $10,170,182.00 | ||
To Bond Payable | $96,000,000.00 | ||
(To record issue of bond at discount) | |||
30-Jun-21 | Interest expense Dr | $6,008,087.00 | |
To Discount on issue of bond | $248,087.00 | ||
To Cash | $5,760,000.00 | ||
(To record interest expense and discount amortization) | |||
31-Dec-21 | Interest expense Dr | $6,025,453.00 | |
To Discount on issue of bond | $265,453.00 | ||
To Cash | $5,760,000.00 | ||
(To record interest expense and discount amortization) |
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