Answer:
1.)
Issue Price of Bonds = $84,628,000
n= 30 (15 year x 2)
i = 5% (10%/2)
Cash flow | Amount | Present value |
Interest ($100,000,000 x 8% x 6/12) | 4,000,000 | 61,490,000 |
(4,000,000 x 15.3725) | ||
Principal | 100,000,000 | 23,138,000 |
(100,000,000 x 0.23138) | ||
Price of Bonds | $84,628,000 |
Discount on issue of Bonds = $15,372,000
2-4)
Date | Account Title and Explanation | Debit ($) | Credit ($) |
Jan 1 2021 | Cash | 84,628,000 | |
Discount on Issue of Bonds | 15,372,000 | ||
Bonds Payable | 100,000,000 | ||
(To record the issue of bonds) | |||
June 30 2021 | Interest Expense | 4,512,400 | |
Discount on issue of bonds (15372000/30) | 512,400 | ||
Cash (100000000 x 8% x 6/12) | 4,000,000 | ||
(To record the interest paid) | |||
Dec 31 2021 | Interest Expense | 4,512,400 | |
Discount on issue of bonds (15372000/30) | 512,400 | ||
Cash (100000000 x 8% 6/12) | 4,000,000 | ||
(To record the interest paid) |
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