Question

Universal Foods issued 8% bonds, dated January 1, with a face amount of $160 million on January 1, 2016. The bonds mature on December 31, 2030 (15 years). The market rate of interest for similar issues was 10%. 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, FVAD 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, 2016. (Enter your answer in whole dollars.)

2. to 4.

Prepare the journal entry to record their issuance by Universal Foods on January 1, 2016, interest on June 30, 2016 and interest on December 31, 2023. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• 1

  Record the issuance of the bond on January 1, 2016.

• 2

  Record the interest on June 30, 2016.

• 3

  Record the interest on December 31, 2023.

Universal Foods Issued 8% bonds, dated January 1, with a face amount of $160 million on January 1, 2016. The bonds mature on December 31, 2030 (15 years). The market rate of Interest for similar Issues was 10%. Interest is pald 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, FVAD 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, 2016. (Enter your answer in whole dollars.) Price of the bonds 2. to 4.Prepare the journal entry to record their Issuance by Universal Foods on January 1, 2016, Interest on June 30, 2016 and Interest on December 31, 2023. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.) View transaction list Journal entry worksheet < 1 2 3 Record the issuance of the bond on January 1, 2016. Note: Enter debits before credits. Date General Journal / Debit Credit January 01, 2016 Record entry Clear entry View general journal

Answer 1

Answer 1. Issue Price of Bonds 136,162,432 Table Value Based on n= Amount Cash Flow Interest - $160,000,000 X 4% 30|(15 Year X 2) 5.00%(10%/2) Present Value 6,400,000 $ 95,348,032 (6400000 x 14.89813) 160,000,000 40814400 (150000,000 X 0.25509 S 136,162,432 Principal $ Price of Bonds Discount on issue of Bonds 23,837,568

Table value based

30th year PV @ 5% = 0.25509

30years annuity Pv @ 5% = 14.89813

Answer 2-4 Date Debit credit jan 1 2016 Account Title and Explanation Cash Discount on Issue of Bonds Bonds Payable (record the issue of bonds) 136,162,432 23,837,568 160,000,000 june 30 2016 7,194,586 Interest Expense Discount on issue of Bonds ( 23837568/30) Cash ( 160,000,000 x 4%) (Record the interest paid) 794,586 6,400,000 7,194,586 794,586 6,400,000 31-Dec-23 Interest Expense Discount on issue of Bonds ( 23837568/30) Cash ( 160,000,000 x 4%) (Record the interest paid) Please comment if you have any doubt Please give thumps up if you satisfied with the answer