Question

Instructons Campbell Inc. produces and sets outdoor equipment. On July 1, 2041, Campbell issued $73,900,000 of 10 year, 11% bonds at a market (effective Interest rate of 9% receiving cash of 583,512,668. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2011 2. Journalize the entries to record the following a. The first semiannual interest payment on December 31, 2011, and the amortization of the bond premium, using the straight line method (Round to the nearest dollar) The interest payment on June 30, 2012, and the amortization of the bond premium, using the straight-line method (Round to the nearest dollar) 3. Determine the total interest expense for 2074 4 Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of 583,512,668 received for the bonds by using the present a le tables (Round to the newest dolar) *Refer to the Chart of Accounts for exact wording of accounties

Answer 1

	Date	Accounts and explanation	Debit(in $)	Credit(in $)
Answer 1	July 1,20Y1	Cash	8,35,12,668
		Bonds Payable		7,39,00,000
		Premium on Bonds Payable		96,12,668
		(To Bond issued at premium)
Answer 2	Dec 31,20Y1	Interest expenses	3583867
		Bond premium($9,612,668/20)	480633
		Cash($73,900,000*11%*6/12)		4064500
		(Interest paid for 6 months ended Dec 31,20Y1)
	Jun 30,20Y2	Interest expenses	3861275
		Bond premium($9,612,668/20)	203225
		Cash($73,900,000*11%*6/12)		4064500
		(Interest paid for 6 months ended Jun 30,20Y2)
Answer 3	Total Interest expenses for 20Y1 =$3,583,867
Answer 5	Present value of the face amount	$4,064,500*PVAF(4.5%,20) =$4,064,500*13.00794 =$52,870,772
		$73,900,000*PVIF(4.50%,20) =$73,900,000*0.41464 =$30,641,896
	Price of Bonds	$83,512,668