Question

Exercise 10-17A Computing bond interest and price; recording bond issuance LO C2 Citywide Company issues bonds with a par value of $81,000. The bonds mature in five years and pay 9% annual interest in semiannual payments. The annual market rate for the bonds is 8%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. Compute the price of the bonds as of their issue date. 2. Prepare the journal entry to record the bonds' issuance. Complete this question by entering your answers in the tabs below. Required Required Compute the price of the bonds as of their issue date. (Round intermediate calculations to the nearest dollar amount.) Table Values are Based on: n = Table Value Amount Present Value Cash Flow Par (maturity) value Interest (annuity) Price of bonds Required 1 Required 2 >

Answer 1

1) Table values are Based on: 10 4% Table Cash Flow Amount Value Par (maturity) value 0.6756 x $81,000 = Interest (annuity) 8.1109 x $3.645 = Price of bonds Present Value $54.724 $29,564 $84,288 Workings: Interest ($81,000 * 9% * 6/12) $3,645 2) Credit General Journal Debit Cash $84.288 Premium on bonds payable Bonds Payable (To record the issuance of the bonds for cash) $3.288 $81.000