Question

Universal Foods issued 10% bonds, dated January 1, with a face amount of $150 million on January 1 2021. The bonds mature on December 31, 2035 (15 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 and December 31 Universal uses the straight-line method. (FV of $1. PV of $1. FVA of $1. PVA of $1. EVAD 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. to 4. Prepare the journal entries to record their issuance by Universal Foods on January 1 2021, interest on June 30, 2021 and interest on December 31, 2028 Complete this question by entering your answers in the tabs below. Reg Reg 2 to 4 Determine the price of the bonds at January 1, 2021. (Round final answers to the nearest whole dollars.) Table values are based on: Amount Present Value Cash Flow Interest Principal Price of bonds Regi Rey 2 to 4 >

Answer 1

Answer 1. Issue Price of Bonds 129,352,725 Table Value Based on n= Amount Cash Flow Interest - $150,000,000 X 10% X 6/12 30 (15 Year X 2) 6.00% (12%/2) Present Value 7,500,000 $ 103,236,225 (7500000 x 13.76483) 150,000,000 26116500 (150000,000 X 0.17411) 129,352,725 Principal Price of Bonds Discount on issue of Bonds 20,647,275

20,647,275 Discount on issue of Bonds Answer 2-4 Date Debit $ credit jan 1 2021 Account Title and Explanation Cash Discount on Issue of Bonds Bonds Payable (record the issue of bonds) 129,352,725 20,647,275 150,000,000 june 30 2021 8,188,243 Interest Expense Discount on issue of Bonds ( 20647275/30) Cash ( 150,000,000 x 10% x6/12) (Record the interest paid) 688,243 7,500,000 8,188,243 688,243 7,500,000 31-Dec-21 Interest Expense Discount on issue of Bonds ( 20647275/30) Cash ( 150,000,000 x 10% x6/12) (Record the interest paid) Please comment if you have any doubt Please give thumps up if you satisfied with the answer